When people are struggling under the weight of debt, filing for bankruptcy can seem like a good solution. However, having a bankruptcy on your credit history has several consequences of which you may not be aware. One of the best ways to avoid bankruptcy is to get help getting out from under your debt.
Consequences of a Bankruptcy
There are several serious consequences for taking a bankruptcy to help settle your debts. When you take a bankruptcy, it stays on your credit report for up to five years, but your name will be on the National Personal Insolvency Index for the rest of your life. The NPII is a searchable database, so even if the bankruptcy is no longer on your credit report, any creditor can look on the database and find your name.
In most cases, bankruptcy does not discharge all of your debts. While most of your unsecured debts may be resolved, such as credit card balances or personal loans, you will still be responsible for debts secured by an asset and for payments made for child support, fines, or penalties you have incurred. In addition, if any debt covered in by the bankruptcy was found to be fraudulent, you would still owe the discharged balance.
Travelling overseas can be difficult because the trustee managing your affairs may ask you to surrender your passport to them. If you do need to travel out of the country, you would not only need to get your passport from the trustee, but they may have to write a letter giving you permission to travel. These are only a few of the consequences of bankruptcy, and there are several others that can make your financial life difficult.
How to Get Help
A good way to avoid bankruptcy is to get help from a financial counsellor who can negotiate with your creditors to reduce what you owe them by extending the payments on your debt. The Debt Negotiators debt agreements are legally binding, so both you and your creditors are obligated to follow the terms of the agreements. There is no charge to work with a financial counsellor, so if you are considering bankruptcy, you should seek one out and discuss your options with them.
Usually, when a debt agreement is negotiated, the counsellor will speak to all of your creditors and try to make a payment arrangement with each one. If, for some reason, their negotiations are unsuccessful, they may fill out a hardship application on your behalf that will help reduce the minimum payments you make every month so it will be easier to repay your debts.
Once you have a debt agreement, you will have it on your credit history for five years and you will also be listed on the NPII. You will also need to inform any company with whom you are applying for credit that you have one. While a debt agreement has consequences, it is usually preferable to taking a bankruptcy.