Tell me why declaring bankruptcy is bad

So, I know that it is bad but I need some more amunition.

A friend of mine recently got a bill for renovations that they had done on a house that they have subsequently sold. Apparently they sort of "forgot" about the bill :wall: - but anyway.

She doesn't have the money to pay it. She doesn't have any assets in her name so her DH is saying "why don't you just declare bankruptcy then it will go away".

My take on it is that banruptcy is bad. It should not be used as a way of getting out of a debt which they did gain benefit from - the house sold for heaps more than they paid for it - even after taking the amount the builder now wants into account.

But I need to know the real ramifications of declaring bankrupty. I know that you can't be a director of a company and your credit rating might as well be zero but what are the other things.

TIA

You can't borrow money for eons afterwards - just think about what you were doing five years ago, and how your life has changed in that time, and then imagine how your life my change in the next five years and all the reasons you might want to borrow money...cars, houses, businesses, personal loans, store cards, interest-free purchases of furniture or hot-water systems, etc etc.

I don't understand why they don't just go to their bank and ask for a loan/redraw against their current mortgage, or even a low-interest credit card???

It's so totally ethically wrong to try to just skip out of paying for something they agreed to, even if the builder doesn't get at them, karma will. My guess, if this is the tack her DH takes regularly, it will be sooner rather than later.

There is a govt website with a lot of information on this topic I will see if I can find it for you.

ETA: Here it is, on consumer affiars website

if they declare bankruprty it takes 5 years after the date to even try to get a loan from anyone , or any other credit like mobile phones , store credits cards . she will be stuffed .when they do the person has have pretty good assets to back them up to get another loan , tell them to work out the company that they owe money , payment arrangements etc. you said she has no assets , computer , tvs , fridges ,washings machines, cars furniture they are assets . the company can reprosses items like that , she cant say my husband owns because then they have to show receipts in his name . her best advice talk to company thats she owes money . i know now companys that r owed money are using commercial agents to chase people to get there money back. the above items i mention are assets .

Muppity, have you spoken further with your friend about this? How did she take it?

bankruptcy lasts for 3 years - but stays on your credit record for 7. your name will also be viewable for life on the public register.

for the first 3 years you cannot travel overseas without permission.

you cannot apply for credit for over appx $2500 = and you must make the debtor aware of your status.

they do not take your basic living essentials (contrary to popular belief!)

you cannot own a vehicle worth more than $5k

she may find it difficult to have utilities connected in her name.

thats about it

You STILL have to repay the money! You don't get out of your bills! They just take out a small amount over X number of years so while it prevents legal action being taken against you etc. you still have to pay the money back in the end anyway (if there's interest such as on a personal loan I THINK the interest stops but I could be totally wrong).

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You STILL have to repay the money! You don't get out of your bills! They just take out a small amount over X number of years so while it prevents legal action being taken against you etc. you still have to pay the money back in the end anyway (if there's interest such as on a personal loan I THINK the interest stops but I could be totally wrong).

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no you dont hun

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You STILL have to repay the money! You don't get out of your bills! They just take out a small amount over X number of years so while it prevents legal action being taken against you etc

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Agree with Kitten on this one sorry, you only have to repay if your income is OVER a certain amount per year (think its about $45,000)

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She doesn't have any assets in her name so her DH is saying "why don't you just declare bankruptcy then it will go away".

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The DH is saying she should declare bankruptcy? What about him? Sounds like a bit of a rotter to me. Tell her it he thinks it's not so bad he should declare bankruptcy himself!

sash, its $65k(ish) might vary by state. I helped a friend go through this, she was in nasty trouble and it was her only option, wasnt so bad in the end. It was like a fresh start for her - she is even now looking at buying a house, but lots of places wont touch her, the ones that will charge .5 to 1%higher interest.

But her hubby should look into how this can affect him too, my friend didnt have a partner and I dont knwo how it could affect their assests - even if its in his name they are still married so one would think the 50/50 rule might come into play?