Declaring Bankruptcy – the Implications on your Personal Life

Some people make a knee-jerk decision to declare bankruptcy. They think it’s the only way out of a poor financial situation. What many don’t realise is that it’s not just your credit rating that will be impacted by declaring bankrupt, it can affect many areas of your life.

Career Choices

For many young people who haven’t yet established their careers, they are narrowing their choices by declaring bankrupt. For older workers, they may not be able to continue in their career after bankruptcy leading to more financial pressure.

There are numerous Australian professional and trade licensing bodies that don’t allow members to be bankrupts. If you want to run your own small business, there may be limitations placed on you. People who are bankrupt can’t manage a trust account in a real estate or accounting firm, for example. You are also not permitted to hold a liquor licence, building or property management licence.

Even if their roles aren’t on your list of preferred jobs, some employers require a clean credit history. It may not be fair if your financial past has no bearing on the role you are applying for, but it is the harsh reality for many bankrupts around Australia.

Living Arrangements

Obviously, if you want to buy a house, you won’t be able to obtain a mortgage while bankrupt. Your partner or family member may need to apply for the loan to be in their name only.

Even if you just want to rent rather than own a home, you can run into difficulties. Some tenancy application forms include a question on bankruptcy so if multiple people apply, you may be less likely to be successful due to your credit history. You may need to make several applications before you find a home to rent.

Relationships

Disagreements about money are a major cause of divorce and relationship breakdowns so bankruptcy can place huge pressure on an existing or future relationship. No longer can you apply for a store card or home loan in your name or joint names. When you enter a new relationship you will need to find the right time to tell your partner about your bankruptcy past. Leave it too long and your partner may become suspicious about any other secrets you are keeping from them. 

Future Wealth

Your ability to build wealth for your future financial security is hampered when bankrupt. If you aren’t able to acquire assets like property because you can’t gain access to borrowed funds, you are stuck in the rent trap and miss out on any booms in property prices.

Before you declare bankruptcy...

Before deciding whether to declare bankruptcy or not, seek professional advice. There may be other alternatives that will save you from the far-reaching impact bankruptcy can have on your life. It's advisable to talk to experts and agencies about your financial situation to get details on options at your disposal and to make sound financial decisions.