Why Bankruptcy is Bad
News
If creditors are hounding you and debts are totally out of control,
filing for bankruptcy may seem like the easy way out. However, just
because it is the easy way out, it doesn’t mean that bankruptcy is the
best solution. You need to understand the implications of bankruptcy on
you short term and intermediate financial future.
Here are a few reasons why bankruptcy can be seriously bad news:
1. The first thing to consider is the affect that bankruptcy will have
on your credit record. Once filed, bankruptcy remains on your credit
record for seven to ten years. This in turn will make you seem as a bad
credit risk to any lender. It will be difficult for you to be approved
for loans and credit in those years. So even if creditors do give you
limited credit, you will need to give lengthy explanations as to why you
applied for bankruptcy and you will also be looking at substantially
higher interest rates and credit fees. Therefore bankruptcy limits your
financial options for many years to come.
2. If you own any assets in your name such as a home or a car – these
may be sold to pay out your creditors. Sometimes it could be worthwhile
to see whether you can borrow against these assets yourself and pay out
your creditors from the proceeds to avoid bankruptcy.
3. Filing for bankruptcy will end some problems but could introduce a
range of new problems and financial difficulties. The financial problems
associated with bankruptcy include closure of your credit and bank
accounts, losing your business as well as general problems with
obtaining credit.
4. Bankruptcy limits you from being able to run and operate a business
in your own name. Australian law further prohibits ex-bankrupts from
holding the position of company director for a period of 7 years from
the date of discharge.
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