Is There Life After Bankruptcy?
Bankruptcy is the most severe debt solution on the market. However, if it’s right for you, it can free you from the burden of bad debt and allow you to start afresh, more or less. There are debts that will not be written off by bankruptcy, your student loan and child support arrears to name but two, though generally speaking, you are wiping the debt slate clean. Or are you?
There may be restrictions placed on your finances after your discharge from bankruptcy, like Income Payment Orders that continue to take a repayment towards your outstanding debt for a fixed term. However, any assets that you acquire after completion of your bankruptcy term will, for the most part, be out of the reach of the bankruptcy order.
It is possible for you to be approved for further credit after successful completion of the bankruptcy term but this is not a straightforward matter. The best risk scenario is that you are approved for a loan or a new credit card but the rates that you are offered are significantly higher than they would be if it weren’t for the bankruptcy. This is simply because your bankruptcy and poor financial track record make you a higher risk to any potential lenders.
However, taking on more credit after your bankruptcy, proving that you are able to service the debt and adequately manage your finances is central to your recovery. You will help to repair your credit rating and instill greater confidence; not only in any potential lender but also in your own ability to handle credit. Being approved for a credit card is difficult and can be very expensive in terms of interest rates and charges. Debit cards and prepaid credit cards will be much easier to get.
Opening a bank account after bankruptcy is possible but can prove to be expensive. As your bank accounts will be frozen or even cancelled in the event of bankruptcy, you will need to make alternative arrangements for banking. Once the account has unfrozen, it’s possible that your old bank will re-open your account but place additional limitations on it. Talk to your bank to find out what options they can offer you.
Being approved for a mortgage after you’ve completed the bankruptcy term can be difficult too, unless you can afford to put down really big deposit. As this will be highly unlikely after bankruptcy, your best option is to try and repair your credit rating as quickly as possible. In the mean time, renting might be the most viable option but again, your landlord might want to examine your credit history and could deem you too great a risk.
For most people, the immediate feeling after bankruptcy is one of relief. The severe debt problems that you had will probably not have come on overnight so the chances are that you’ve been living with the stress of mounting debt for a while. To have this stress alleviated is a terrific weight off your shoulders. This can soon be replaced by the stress of worrying about life after bankruptcy and the impact that it could have on your ability to take out a loan, buy a house or start a business. There are alternatives to bankruptcy though, like the IVA, which could alleviate some of these concerns.
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