“What are the ramifications of declaring bankruptcy, and is it worth it for some people?”

Declaring bankruptcy is to your personal finances what turning your back on your team is to being a football fan.

They are both a declaration that you’ve given up. You might lose some respect from those closest to you. And both make it harder to participate generally in society.

The major difference is that you can go back to your footy team at any time, with little ongoing consequence.

Bankruptcy is a drastic solution. It has long-term impacts on your ability to play ball financially. You will lose whatever assets you have left, might have to give up future income and might lose your passport. It will permanently be on your record.

You can forget about getting a loan or a credit card for years. That is, no mortgage, no finance for your business, nothing you can’t buy immediately with cash.

While bankruptcy is there and there to be used – an argument Rolling Stone Keith Richards uses to justify drug injestion – it seems to be used too often when other options are available.

The typical person seeking to declare bankruptcy is male, aged 35-45, likely to be unemployed, is single, earns between $10,000 and $50,000 a year and goes under owning less than $50,000.

Bankruptcy should be a last resort. If you’ve dug yourself a deep financial hole, consider some of the other solutions, including “personal involvency agreements” and “debt agreements”, which mean you have negotiated with your creditors.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser.