Bankruptcy is a process where you are legally declared unable to meet your debts. But this is not a course of action or a decision that anyone should take lightly. Firstly, you may not be released from all of your debts. Secondly, being declared bankrupt can permanently affect whether you can get credit in the future as your name will appear on the National Personal Insolvency Index (NPII) forever.
Your bankruptcy period is no picnic. It is normally 3 years and 1 day but during that period you are no longer in control. A bankruptcy trustee will be appointed to look after your affairs so you can’t do much without the trustee’s permission.
Depending on what you do for a living your employment may be affected. If you are working anywhere in the financial industry it could be a problem to continue. If won’t be able to continue as a director of a company and if you operate you operate a business as a sole trader or partnership, you will have to tell everyone they are dealing with a bankrupt.
Your assets including your home can be sold to repay creditors and you may well end up living in rental accommodation. You will have the basics necessary to live, but nothing fancy. You will not be able to travel overseas without the written permission of the trustee.
Moving on after you are released from bankruptcy may not be easy. You may find it hard to do some of the things you used to take for granted. You may find it difficult to borrow money and buy things on credit; and you may also find it hard to rent, get electricity, water or the telephone connected without paying a bond. Your ability to operate a bank account may also be restricted or even denied. Some jobs will be denied to you as well so you may have to retrain or consider self-employment.
So it means that you are probably going to be steered towards a cash economy; possibly responsible for earning your own income and paying cash for everything. It’s actually not a bad thing because we encourage over-spenders to do this even though they are not in bankruptcy. It is a simple way to live and makes buying decisions very easy. If you don’t have the money, you can’t make the purchase. This time of changed money habits is also a very good time to start budgeting.
Even though your credit record will be adversely affected for only 5 years or so as a direct result of bankruptcy, it is the fact that you are named in the National Personal Insolvency Index (NPII) forever that is the problem. This is a publicly searchable register. So financial institutions and prospective employers are going to have ongoing access.
Post-bankruptcy is a time where you are likely to need a lot of support. It’s a tough journey back on your own. Regardless of the physical restrictions and obstacles you face there is going to be some emotional damage. Firstly, there can be some shame and embarrassment attached to bankruptcy because it is a very public process. Everyone around you knows. Of course, it also affects your spouse and other family members so relationships can be strained or broken. Secondly, you will probably experience some loss of confidence so you may not feel like trying again.
So it could be a time for some new friends and new opportunities and a new start to life. As the old saying goes, it could be the darkness before the dawn. If you are struggling, please seek help. There is generally community support available and in western suburbs of Brisbane you will find it through Facebook group 4074 Community & Beyond. Just ask.