Lots of bills? Too much debt? Not nearly enough money? Many people struggle financially at some point in their lives. Unanticipated events like hospitalisation, redundancy, and even divorce, can severely affect your financial condition. Yet, when there is no other way to appropriately cope with your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, traumatic, and emotional. Consequently, a lot of individuals dig themselves a deeper hole before even filing for personal bankruptcy. It is imperative that you seek professional advice pertaining to your bankruptcy options. There are certain financial decisions that should be avoided at all costs to avoid wreaking havoc on your bankruptcy case. This article will offer 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 dilemmas is to stop using your credit cards. Although it is tempting to make modest purchases like food and fuel, the truth is that credit cards have excessively high fees which only get magnified when you are unable to make repayments. Along with this, making big purchases with the knowledge that you will shortly be going bankrupt is considered fraud. Obviously, small purchases are fine, but if you purposely max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will find yourself in a substantially worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. Even though it may sound logical to pay off 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 lawsuits which will inevitably postpone your bankruptcy filing and discharge. Every creditor carries 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 undertaken to recuperate the money that was paid to the favoured creditor to ensure that it can be spread equally amongst all creditors.
Lie or Withhold any Information
Whatever you do, do not lie or withhold any information regarding your financial situation. When you file for bankruptcy, you are required by Law to provide complete and specific information regarding 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 not sure of anything, talk with your lawyer and spend the time to investigate to make sure you are providing the correct information. When it concerns money, there are computerised trails just about everywhere, so do not 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 protect those assets from bankruptcy is a misconception. In fact, transferring assets will not protect those assets whatsoever, and may be deciphered as fraudulent activity which comes with criminal repercussions. Selling assets to repay your debts is, of course, a legitimate reaction to try to relieve the financial burden. It’s essential to keep in mind that your Statement of Financial Affairs is a lawful document, so you must be completely honest with your financial history or face the likely consequences of getting caught. You will be asked by the trustee if you sold, transferred or gave away any assets, usually for a period of one year prior to filing for bankruptcy. You will additionally be asked what you did with the money you acquired from those transfers, so be wary of a preferential transfer, particularly with friends and family members.
Deposit Non-Income Earning Money Into Your Bank Account
Family and friends are there to help in times of distress. If you’re encountering financial challenges, it’s typical for friends and family to give money to you to alleviate 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 also critical to keep work related money and personal money completely separate from each other. All of these activities can create a considerable amount of confusion and can trigger claims of fraud when filing for bankruptcy.
As you can see, there are some serious 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. For more details or to speak to somebody about your circumstances, contact Bankruptcy Advice on 1300 879 867 or visit https://www.bankruptcy-advice.com.au