Too many bills? Too much debt? Not nearly enough money? Lots of people struggle financially at some point in their lives. Unanticipated situations such as hospitalisation, redundancy, and even divorce, can greatly alter your financial circumstances. Yet, when there is no other way to effectively handle your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, traumatic, and emotional. As a result, too many people dig themselves a deeper hole before even filing for personal bankruptcy. It is critical that you seek professional advice regarding your bankruptcy options. There are a number of financial decisions that should be avoided at all costs to avoid damaging your bankruptcy case. This article will provide some tips on things you should never do before going bankrupt.
Using Credit Cards
The very first thing you should do when you are facing financial troubles is to cease using your credit cards. Although it is tempting to make small purchases like food and fuel, the fact is that credit cards have outrageous fees which only get exacerbated when you’re unable to make repayments. Along with this, making large purchases with the understanding that you will shortly be going bankrupt is deemed fraud. Obviously, small purchases are okay, but if you purposely max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will wind up in a significantly worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. Although it may sound reasonable to repay as much debt as possible, the reality is that it can land you in a considerable amount of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract lawsuits which will ultimately prolong your bankruptcy filing and discharge. Every creditor holds the same weight under Australian Law, so if you completely repay one over another, the bankruptcy trustee will file a claim against the creditor in what’s called a clawback lawsuit. This is carried out to recuperate the money that was paid to the favoured creditor to ensure that it can be distributed equally between all creditors.
Lie or Withhold any Information
Whatever you do, do not lie or conceal any information regarding your financial situation. When you file for bankruptcy, you are required by Law to provide complete and exact information relating to your assets, income, debts, and expenses. Failing to reveal an asset, for example, is considered misrepresentation and you will be liable to criminal prosecution. If you’re unsure of anything, talk with your lawyer and spend the time to investigate to make sure you’re supplying the correct information. When it involves money, there are computerised trails pretty much everywhere, so don’t think you can conceal anything. You might get away with it initially, but it can plague you and your case later down the track.
Transfer or Move Assets
Transferring or moving assets to a family member’s name to save those assets from bankruptcy is a myth. In reality, transferring assets will not shield those assets whatsoever, and may be deciphered as fraudulent activity which comes with criminal repercussions. Selling assets to pay off your debts is, of course, a natural response to attempt to alleviate the financial burden. It’s important to keep in mind that your Statement of Financial Affairs is a legal record, so you must be completely honest with your financial history or deal with the potential consequences of getting caught. You’ll be asked by the trustee if you sold, transferred or gave away any assets, usually for a period of one year before filing for bankruptcy. You will even be asked what you did with the money you collected from those transfers, so be wary of a preferential transfer, especially with friends and family members.
Deposit Non-Income Earning Money Into Your Bank Account
Family and friends are there to assist in times of need. If you’re encountering financial hardship, it’s typical for family and friends to offer money to you to reduce the burden. Do not deposit any money from friends or relatives into your bank account, or any money that is not specifically income related such as work or dividends. It’s likewise essential to keep work related money and personal money completely separate from each other. All of these activities can produce a lot of confusion and can trigger claims of fraud when filing for bankruptcy.
As you can see, there are some substantial consequences for relatively trivial financial decisions when you go bankrupt. To make sure you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. To learn more or to speak with somebody about your situation, contact Bankruptcy Experts Taree on 1300 795 575 or visit http://www.bankruptcyexpertstaree.com.au