My debts are getting on top of me and I have just lost my job. Should I go bankrupt?

I have debts of over $700,000 and have just lost my job.  Part of the $700,000 is due to a mortgage I have over the house I own in South Australia. The mortgage is $400,000 but the house is only worth $500,000.

I have a vehicle but this is only worth $20,000.

I don’t know what I am going to do and think bankruptcy might be my only option. Is this a good idea?

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    The problem with going bankrupt is that it destroys your credit rating and thus makes it very hard for you to start again.
    If you can avoid bankruptcy you are usually better off, although this depends greatly on all the circumstances eg such as the likelihood of you finding alternative employment, and how soon.

    If you sell your house for $500,000 clear of commission and legal fees, then you will have to repay the mortgage of $400,000 first. This will elave you with a $300,000 debt and if you use the balance of the $100,000 you will have a $200,000 debt.

    Whilst this is still a very sizable problem, it is far better than $700,000 and may be manageable, particularly if you can secure alternative employment. You might also be able to renegotiate the terms of repayment to make it more manageable.

    Legal Eagle Answered on 10 September 2015.
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