Lots of bills? Too much debt? Not enough money? Many people struggle financially at some point in their lives. Unanticipated situations like hospitalisation, job loss, and also divorce, can drastically affect your financial situation. Yet, when there is no other way to effectively control your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, stressful, and emotional. As a result, too many individuals dig themselves a deeper hole before even filing for personal bankruptcy. It is crucial that you seek professional advice relating to your bankruptcy options. There are various financial decisions that should be avoided at all costs to avoid ruining 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 having financial dilemmas is to stop using your credit cards. Even though it is tempting to make modest purchases like meals and fuel, the fact is that credit cards have excessively high fees which only get intensified when you’re not able to make repayments. In addition to this, making large purchases with the knowledge that you will shortly be going bankrupt is considered fraud. Needless to say, small purchases are okay, 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. Even though it may appear to be reasonable to payoff as much debt as possible, the truth is that it can land you in a lot of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract court actions which will ultimately delay 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 recoup the money that was paid to the favoured creditor to ensure that it can be dispersed equally amongst all creditors.
Lie or Withhold any Information
Whatever you do, do not lie or withhold any information relating to your financial situation. When you file for bankruptcy, you are required by Law to supply complete and accurate information pertaining to your assets, income, debts, and expenses. Failing to disclose an asset, for example, is considered misrepresentation and you will be liable to criminal prosecution. If you’re uncertain of something, talk with your lawyer and spend the time to investigate to make sure that you are providing the correct information. When it comes to money, there are electronic trails almost everywhere, so don’t think you can hide anything. You might get away with it in the first instance, but it can torment 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 misconception. As a matter of fact, transferring assets will not shelter those assets in any way, and may be deciphered as fraudulent activity which comes with criminal consequences. Selling assets to pay back your debts is, by all means, a normal reaction to try to reduce the financial burden. It’s vital to remember that your Statement of Financial Affairs is a lawful record, so you must be truthful with your financial history or confront the potential repercussions of getting caught. You will be asked by the trustee if you sold, transferred or gave away any assets, typically for a period of one year before filing for bankruptcy. You’ll additionally be asked what you did with the money you acquired from those transfers, so be careful of a preferential transfer, especially 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 are encountering financial problems, it’s normal 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 important to keep work related money and personal money totally separate from each other. All of these activities can create a great deal of confusion and can bring about claims of fraud when filing for bankruptcy.
As you can see, there are some severe consequences for relatively trivial financial decisions when you go bankrupt. To make certain 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 circumstances, contact Bankruptcy Advice Perth on 1300 879 867 or visit https://www.bankruptcy-advice.com.au/perth