Bankruptcy is NOT the Easy Way Out

Imagine this - you are in debt. You owe a lot of money to many different banks and there is no way you can even start to pay it back. These banks are calling you every day and night to start to recoup some money. You can't afford to eat, buy clothes or petrol. The stress caused by your situation makes you act strange and your friends and family start drifting away from you. Then you hear about a thing called Bankruptcy which will make all your problems go away and you won't have to repay a cent.

Looking at it through a debtors eyes, it's easy to see why Bankruptcy is hailed as the easy way out. You don't have to pay for your mistakes, you aren't help accountable and your debt will just disappear, no questions asked.... if only it worked that way.

Bankruptcy is a huge commitment with several rules, restrictions and regulations. It is designed to help you learn from your mistakes, hold yourself accountable and repay whatever you can to your creditors.

Once you declare bankruptcy, a trustee will be assigned to your case. Anything of value outside of the set thresholds will be handed over to your trustee to sell. All the money from the sale of your assets will be distributed to your creditors.

The assets taken could include your home, car, tools, watercraft and large windfalls such as lotto wins, inheritances and your tax return.

Bankruptcy has thresholds placed on things like vehicle, tools of trade and your income anything worth more than the threshold will be given to your creditors.

A bankrupt must also adhere to strict rules, including no overseas travel, and you can not borrow money for the duration of your bankruptcy.

Bankruptcy can last from 3 to 8 years and will appear on your credit rating for 8 years. You will also be listed on the National Personal Insolvency Index for life.

There is nothing easy about Bankruptcy, although it does have it's place in Australia. For people who have completely exhausted all their options, bankruptcy can create a solid foundation from which to rebuild their finances.

For people who have only just fallen into debt, there are a number of other debt relief options available such as debt consolidation and debt agreements.

You can even apply for an informal debt agreement which wouldn't impact on your credit rating at all.

For more information on debt relief options click here.