Often when someone is facing financial distress we focus on the financial benefits that bankruptcy brings, in terms of your debts being wiped and creditors no longer pursuing you for payment. However, a recent report from the Melbourne University has shed light on the many non-financial benefits that bankruptcy can bring.
The Report was based upon a survey completed by nearly 200 current and former bankrupts on their experiences after declaring bankruptcy. Certain key findings were as follows:
- 74% of respondents said they had a better capacity to meet day to day living expenses.
- 77% had better financial management.
- 55% had better physical health.
- 61% had better mental health.
- 57% had better relationships and family life.
- 70% had a better general quality of life.
So while there are definitely financial benefits to be gained from declaring bankruptcy, there are also many underlying benefits including having more money on hand to pay living expenses, no longer having creditors and debt collectors chasing you for money, reduced stress from not always having to scrounge around for the money you need to pay towards your debts and giving you the fresh start you need to become more financially stable.
Perhaps most interesting was that only 42% of respondents said they had worse access to credit because of bankruptcy. This is usually one of the main sticking points for people considering bankruptcy, that their ability to borrow will be severely hampered forever. Not only did the study find this is not the case, it may also be a blessing in disguise that bankrupts become less reliant upon credit going forward and therefore become more financially stable.
A final note is this – recent proposed legislation provides for debt agreements to last for no longer than three years, down from five. Having two years less to pay off your debt would undoubtedly put a significant amount of stress on your quality of life for the length of the debt agreement. At the same time there is also proposed legislation that willr educe the term of bankruptcy to just one year.
A full copy of the Report can be found here.
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