‘Bankruptcy’ is one of those words that is often stigmatised – what exactly is bankruptcy and how can you avoid its traps?
Bankruptcy is a legal process that releases a person from (almost) all of his or her debts. Declaring bankruptcy can offer a clean slate and a chance for you to start anew financially. But it also has negative effects, in that it marks your credit file and can result in the loss of your home and other assets. Bankruptcy is generally considered as a last resort – but it can be a good option for those who can no longer afford to pay any of their debts and have little or no assets to protect.
Formal alternatives to bankruptcy include a Debt Agreement or a Personal Insolvency Agreement. These are options to help those who are genuinely struggling, but who can afford to pay some of their debt and so do not necessarily have to declare bankruptcy.
You can work to avoid bankruptcy through simple, everyday solutions. For example, avoid using or applying for new credit cards, as it can turn into a cycle of over-spending and charging debts onto new cards. Know your limits and make sure you don’t live beyond what you can afford. Most importantly, choose to get help as soon as you realise that you are falling behind on paying off your debts. Don’t ignore the letters and calls from the banks.
Allow Debt Free Australia to help you get back on your feet, avoid bankruptcy and become debt free. Call us toll-free on 1800 462 767 whenever it is convenient for you. We operate 24 hours a day, 7 days a week.