Lots of bills? Too much debt? Not enough money? Most individuals struggle financially at some point in their lives. Uncontrolled situations like hospitalisation, redundancy, and even divorce, can significantly affect your financial circumstances. But, when there’s no other way to effectively manage your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. Consequently, too many individuals dig themselves a deeper hole before even filing for personal bankruptcy. It is crucial that you seek professional advice concerning your bankruptcy options. There are particular financial decisions that should be avoided at all costs to avoid damaging your bankruptcy case. This article will offer some tips on things you should never do before going bankrupt.
Using Credit Cards
The first thing you should do when you are having financial troubles is to cease using your credit cards. Whilst it is tempting to make modest purchases like food and petrol, the fact is that credit cards have outrageous fees which only get exacerbated when you are not able to make repayments. Alongside this, making large purchases with the understanding that you will soon be going bankrupt is deemed fraud. Of course, small purchases are fine, but if you intentionally max out your credit cards before filing for bankruptcy, creditors will investigate and you’ll find yourself in a substantially worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. While it may sound logical to repay as much debt as possible, the truth is that it can land you in a great deal of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract court actions which will essentially postpone your bankruptcy filing and discharge. Each and every creditor holds the same weight under Australian Law, so if you completely repay one over another, the bankruptcy trustee will take legal action against the creditor in what’s called a clawback lawsuit. This is done to recuperate the money that was paid to the favoured creditor so that it can be distributed equally amongst all creditors.
Lie or Withhold any Information
Whatever you do, do not lie or conceal any information relating to your financial situation. When you file for bankruptcy, you are required by Law to provide complete and accurate information regarding your assets, income, debts, and expenses. Failing to reveal an asset, for instance, is considered misrepresentation and you will be liable to criminal prosecution. If you are not sure of something, talk to your lawyer and spend the time to investigate to ensure you’re supplying the correct information. When it relates to money, there are computerised trails just about everywhere, so don’t think you can conceal anything. You might get away with it in the first instance, but it can haunt you and your case later down the track.
Transfer or Move Assets
Transferring or moving assets to a relative’s name to protect those assets from bankruptcy is a misconception. In reality, transferring assets will not shield those assets whatsoever, and may be taken as fraudulent activity which involves criminal consequences. Selling assets to pay off your debts is, of course, a legitimate response to try to relieve the financial strain. It’s essential to bear in mind that your Statement of Financial Affairs is a legal document, so you must be truthful with your financial history or deal with the probable repercussions of getting caught. You’ll be asked by the trustee if you sold, transferred or gave away any assets, typically for a period of one year prior to filing for bankruptcy. You will also be asked what you did with the money you received from those transfers, so be careful of a preferential transfer, particularly with friends and family members.
Deposit Non-Income Earning Money Into Your Bank Account
Friends and family are there to assist in times of need. If you’re facing financial hardship, it’s normal for friends and family to offer money to you to lessen 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 critical to keep work related money and personal money completely separate from each other. All of these activities can create a lot of confusion and can lead to claims of fraud when filing for bankruptcy.
As you can see, there are some significant consequences for relatively insignificant financial decisions when you go bankrupt. To guarantee you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For additional information or to speak to someone about your circumstances, contact Bankruptcy Experts Whitsundays on 1300 795 575 or visit Bankruptcy Whitsundays