Thinking of going bankrupt?

Not a good idea really. A number of farmers along with 3,000 other New Zealanders declare Bankruptcy every year.

Some people see bankruptcy as an easy solution to a mounting tide of debt and worry. They think it will solve all their problems and life will be easy. Well it may not be, it could be worse and the stigma may hang with you for years, not to mention the implications both personally and professionally.

A recent article in the Bay of Plenty Times by a Rebekah Webby was a chilling reminder of how difficult it can be. She pointed out that you either declare bankruptcy by filing a petition in the High Court or more commonly a creditor (a person to whom you owe money) puts you into bankruptcy.

Effectively, the Official Assignee acts as an independent administrator for your affairs. They will take your property and sell it to pay creditors.

So what are some of the restrictions? You cannot be a company director. If you are applying for a loan, you are obliged to disclose that you are bankrupt. You may also have difficulty with overseas travel. I know someone who has previously been bankrupt state that they could not get on a plane to Australia.

All this applies to farming as well. Once declared bankrupt, there are a whole range of restrictions put in place.

As a broker, I have great difficulty in finding finance for an ex-bankrupt. The rates are always much higher and the deal is more difficult to do. Sometimes we can explain how you became bankrupt, which may often be by an association from a working partnership, but lenders are still really wary.

Always be aware of personal guarantees, where you sign your name not only for yourself but more particularly with others. It is that signature that can often come back to bite you. Partnerships are dangerous, so be careful what you sign.

I have also found when someone is going bankrupt, they really don't care who they take down with them. If things are really messy and you think somebody is trying to bankrupt you, then they probably are and it's time for you to move quickly. Talk to your lawyer and advisors and do something. Doing nothing is not an option.

I have seen a number of people bankrupted before they had time to react. Times were tough, they put their head in the sand and by the time they looked up, it was too late. Once bankrupt, there is no way back either, so don't think you will be able to phone up and get back to normal, whatever normal is.

In summary, bankruptcy may seem like an easy out from mounting debts and associated stresses, but believe me it is not nice. The Government puts a whole range of restrictions on you and it seriously impairs your credit for many years.

If you are facing bankruptcy, face up to it and do your best before it is too late.


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