Bankruptcy is often seen as a failure but life after bankruptcy presents opportunities. It’s a chance to look at your relationship with money and approach to budgeting in a new light. Typically you’ll be discharged from bankruptcy three years and one day after you filed the petition and statement of affairs with the Australian Financial Security Authority. From this point forward, the bankruptcy will be listed on your credit report for a further two years and your name will appear permanently on the National Personal Insolvency Index. These marks against your name may make it difficult to get your finances in order after bankruptcy. It can be a hard slog but it’s not impossible. Here’s some tips to get you started.

Build a financial buffer

One of the most common reasons for people going into bankruptcy is unemployment or loss of income, which generally means there wasn’t a sufficient safety net to cushion their change in situation.  Work out a budget (check out our blog on how to start a budget) and make sure this includes putting money into savings account so you start to build a buffer. A good rule of thumb is to put aside 5 to 10 per cent of your income each month.

Don’t be afraid of credit

One of the steps to getting your finances back on track is rebuilding your credit history. Whether it’s a mortgage or a car loan, there are finance companies that are willing to lend to people who have been discharged from bankruptcy. Do your research and examine the contract and costs of each before signing on the dotted line.

Be debt aware

You’ve already had the experience of going bankrupt due to being overloaded with debt. Avoid the same mistakes again by being aware of the debt you take on and whether you have the capacity to repay it. To know whether you’re taking on too much debt, calculate your debt to income ratio. You can do this by adding up your debts, then dividing it by your monthly income after tax. Generally speaking, it is too much if it is 20 per cent or over.  These are just a few ideas to help you on the road to financial recovery. Don’t forget to speak to a financial counsellor or your bank if you need more help.

The advice provided on this website is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. 

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For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan.
If you are on government benefits, ask if you can receive an advance from Centrelink.
www.humanservices.gov.au/advancerepayments

The Australian Government’s MoneySmart Website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.