Lots of bills? Too much debt? Not enough money? Most individuals struggle financially at some point in their lives. Unforeseen incidents such as hospitalisation, losing a job, or even divorce, can significantly affect your financial condition. But, when there is no other way to appropriately control your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, traumatic, and emotional. Consequently, too many people dig themselves a deeper hole before even filing for personal bankruptcy. It’s essential that you seek professional advice relating to your bankruptcy options. There are a number of financial decisions that should be avoided at all costs to avoid ruining your bankruptcy case. This article will present 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 issues is to cease using your credit cards. Even though it is tempting to make modest purchases like food and petrol, the truth is that credit cards have exorbitant fees which only get compounded when you are not able to make repayments. In addition to this, making big purchases with the understanding that you will shortly be going bankrupt is deemed fraud. Naturally, small purchases are fine, but if you deliberately max out your credit cards prior to filing for bankruptcy, creditors will investigate and you’ll find yourself in a much worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. Although it may appear to be practical to pay off 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 essentially impede 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 sue 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 among all creditors.
Lie or Conceal 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 supply complete and specific information pertaining to your assets, income, debts, and expenses. Failing to acknowledge an asset, for example, is considered misrepresentation and you will be liable to criminal prosecution. If you are uncertain of anything, speak to your lawyer and spend the time to investigate to ensure you’re supplying the correct information. When it relates to money, there are digital trails just about everywhere, so do not think you can hide 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 family member’s name to save those assets from bankruptcy is a myth. In fact, transferring assets will not preserve those assets at all, and may be interpreted as fraudulent activity which comes with criminal consequences. Selling assets to pay back your debts is, by all means, a natural reaction to attempt to ease the financial burden. It’s paramount to bear in mind that your Statement of Financial Affairs is a lawful record, so you must be straightforward with your financial history or confront the potential consequences 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 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, especially with friends and family members.
Deposit Non-Income Earning Money Into Your Bank Account
Family and friends are there to help in times of need. If you’re encountering financial distress, it’s common for family and friends to give money to you to ease 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 entirely separate from each other. All of these activities can create a great deal of confusion and can trigger claims of fraud when filing for bankruptcy.
As you can see, there are some serious 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 talk to someone about your circumstances, contact Bankruptcy Experts Port Stephens on 1300 795 575 or visit http://www.bankruptcyexpertsportstephens.com.au