Many Ideas - Is Bankruptcy Ever a Good Idea ?

People's judgement

In the good times we are often tempted to take on as much debt as we can afford. However, recent economic conditions have resulted in many businesses going to the wall and people losing their jobs. For many people this has meant that they can no longer afford to finance their lifestyle.

As the economic storm clouds gather and jobs lost the psychological pressure on those struggling to make ends meet can become too much. In addition, the media is awash with companies purporting to get you out of debt and giving you a clean financial start. If these two aspects can often combine to make bankruptcy look irresistible.

However, there is a problem here in that people's judgement can often be clouded by the stress they are under. Financial freedom is not the result of bankruptcy.

These adverts are designed to make you feel that bankruptcy is simple and that having gone through the process everything in the garden will be rosy. The fact is that these companies behind these ads do very nicely financially, but fail to fully explain the real consequences of bankruptcy.

The downsides of bankruptcy are many and serious. The bottom line is that the majority of your assets will be sold, including your home and cherished possessions, and your credit rating will be in tatters, your financial credibility destroyed.

Very often credit cards can be the root cause of one's bankruptcy. You may think that not having a credit card will be of real benefit to you after bankruptcy. However, credit cards can often act as a short term buffer for unexpected costs, and people often underestimate their value.

In fact the best way to improve one's credit rating is to demonstrate that one can handle credit responsibly. This can be extremely difficult to do after bankruptcy, as any sort of borrowing, even a simple overdraft, can be very hard to obtain. If you cannot obtain any sort of credit, how are you going to demonstrate that you can be financially responsible?

And this is what most companies and organisations specialising in "debt relief" failed to point out, at least in their sales literature. They concentrate on the appeal of being free from your debt and the stress that comes with it, but failed to emphasise that after bankruptcy one's financial life can still feel impossible.

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