Bankruptcy is a legal status that refers to a person or other entity that is unable to pay back its debt. You can go bankrupt in two main ways either by voluntary filing for bankruptcy or when creditors ask the court to order a person bankrupt. The process of bankruptcy differs depending on the laws of the country in consideration. In Australia, several forms have to be filled with Australian Financial Security Authority (AFSA) who then takes the decision of whether to declare you bankrupt or not.
The many alternatives that should considered before declaring bankruptcy are debt consolidation, debt agreement, debt settlement and debt refinancing. Debt consolidation is the option of getting one loan and pay off all the other loans. The idea is that now you have to deal with only one creditor. Debt agreement and debt settlement are made through negotiations with creditors. Debt refinancing is when a loan is replaced to get a new one with better terms. However, all of these should be considered very carefully making sure the terms are favorable in the short term as well as in the long term and the companies whom you’re dealing with are licensed by AFSA.
The Australian government has a lot of programs that aim to help its citizens in debt. For instance, free legal advices, national debt helpline, debt help in Australia, Moreover, a link to the registered trustees contact list can also be found on the official website along with Debt agreement administrators contact list in order to find a registered debt agreement administrator. To settle dispute with debtors and creditors the help of free external dispute resolution (EDR) can be taken.
When a person has considered all other options but found no way of paying back money then declaring bankruptcy is the only option. However, first this has to be analyzed that how bankruptcy is going to solve all the problems. The benefits of declaring bankruptcy should be compared with the costs and then a rational decision should be taken. It is always recommended that the help of financial advisors should be taken. If the right decision is taken then bankruptcy can actually give you the financial footing that you need for a fresh financial start.
Some common reasons for declaring bankruptcies are unemployment, overextended credit, divorce, medical expenses.
Unemployment is one of the major reasons, if a person has a lot of debt to pay while no source of income then bankruptcy can be considered rather than going deeper in trouble.
Seriously overextended credit can be another reason if all the debts are just being piled up and you see no way out. Then bankruptcy can be declared in order to get the pressure of creditors off your shoulders.
Divorce is a really common reason for bankruptcy since it affects the individual emotionally thus it decreases the productivity and efficiency level. Additional bills can come from alimony or child care payments and legal fees for court proceedings.
Increases in medical expenses can also badly affect the financial condition of a person. Unusual or serious diseases can easily take up all your savings, home equity, educational funds and much more leaving you in such a condition that paying off your debts may seem impossible.
Other than these, few signs that signal that you better consider bankruptcy as an option are, if you are consistently paying your necessities bills by the credit card because you have no available cash. This is dangerous since the debt is increasing. On the other hand, if paying by one credit card by taking out a cash advance or transferring the balance to another card has become a usual thing then that too is a bad sign. In case you know that your debt is way too high that even working for overtime won’t get you sufficient amount of money then you need to consider bankruptcy. In addition, if debt problems are interfering with your life to a noteworthy extent especially if it is affecting your health then you should not be afraid to think about bankruptcy since your own health is more important than anything else.
In case you have received a notice that a lender is attempting to garnish your wages, declaring bankruptcy will at least temporarily prevent this order from going forward. Moreover, if you are regularly taking money from retirement accounts to pay your expenses or debt then that is a bad sign too since those are for your future and you’re putting that in danger. Furthermore, if you have a home that is nearing foreclosure it’s better to take it as an alarming sign and take the necessary steps now then to suffer later.
The pros and cons of bankruptcy can be different for different countries. They should be carefully studies before taking any such decision. You can also seek help from legal and financial advisors before making any decision
