It might seem like the only debt relief option available to a debtor is filing for bankruptcy. While it is one way of keeping the nagging lenders at bay, any sane individual must work towards avoiding bankruptcy at all costs as it has more cons than pros. The first disadvantage of bankruptcy is that once one files for it – there is no way it can be cancelled until the desired time is up.
Filing for bankruptcy has negative consequences too. The following could happen:
Consequences of Filing for Bankruptcy
- Someone’s Assets Can Be Sold – As much as a debtor will be able to keep certain goods deemed ordinary, there are certain assets that can be auctioned by the trustees to have creditors paid. In case an individual has a car or house, they can be disposed of to pay creditors.
On the same note, an individual who has filed for bankruptcy is not allowed to take certain goods to certain destinations and in case this happens, one is liable to prosecution. Avoiding bankruptcy is therefore better than having to bear its consequences.
- Income Might Get Affected – As much as people declare bankruptcy to avoid the wrath of creditors, this might eventually have a drastic effect on an individual’s earnings. Even after filing for bankruptcy, lenders are keen to know how debts owed can be recovered. In case they find out a debtor’s net worth is sufficient to pay part of the credit, they will often go for it. This is reason enough to work towards avoiding bankruptcy by exploring other friendlier debt relief options.
- Employment Gets Affected – In case one files for bankruptcy and is working within certain institutions, chances of a demotion or dismissal are high. People that work at the army or in financial institutions are likely to have their services terminated when employers learn they are bankrupt. An individual must therefore work on how to avoid bankruptcy in order to keep a job.
- Business Might Be Restricted – If one owns a company, the license may be withdrawn unless there is a letter from the courts. At other instances, one’s activities may be restricted. This makes life pretty hard and it would be prudent if an individual gathers information on avoiding bankruptcy as soon as financial troubles begin.
- A Borrower May Not Get Released from All Debts – Under a bankruptcy agreement, an individual is released from paying only the unsecured debts. Certain obligations like child support, penalties and fines are to be paid in full.
- Travel May Be Restricted – Once a debtor declares bankruptcy, movement to other countries or states gets restricted. In most cases, the passport is held by the trustee and this may compromise someone’s freedom tremendously.
- Someone’s Name Appears on NPII – The name of the debtor appears on the National Personal Insolvency Index for a maximum of five years.
- Getting Credit is Compromised – Anyone that files for bankruptcy cannot easily access borrowing because of poor credit rating. Lenders always take a look at a borrower’s credit score and if this is poor, they cannot offer any credit, all the reason to avoid being forced into bankruptcy.
When there is financial trouble, an individual should seek the help of debt mediators with the knowledge to give proper advice that works. In the meantime, one should avoid bankruptcy unless it is absolutely necessary.
For more information, just visit us at https://www.debtmediators.com.au/bankruptcy-solutions-insights/avoid-bankruptcy/