Lots of bills? Too much debt? Not nearly enough money? Most people struggle financially at some point in their lives. Unforeseen situations like hospitalisation, job loss, or even divorce, can severely affect your financial circumstances. But, when there is no other way to properly cope with your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, demanding, and emotional. Consequently, too many people dig themselves a deeper hole before even filing for personal bankruptcy. It is vital that you ask for professional advice relating to your bankruptcy options. There are various financial decisions that should be avoided at all costs to avoid damaging 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 problems is to stop using your credit cards. Whilst it is tempting to make small purchases like meals and petrol, the truth is that credit cards have excessively high fees which only get intensified when you are unable to make repayments. Along with this, making big purchases with the knowledge that you will soon be going bankrupt is considered fraud. Naturally, small purchases are okay, but if you intentionally max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will 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 logical to settle as much debt as possible, the reality 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 impede your bankruptcy filing and discharge. Each 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 carried out to recover the money that was paid to the favoured creditor to ensure that it can be spread equally between all creditors.
Lie or Conceal any Information
Whatever you do, do not lie or withhold any information concerning your financial situation. When you file for bankruptcy, you are required by Law to provide complete and specific information pertaining to your assets, income, debts, and expenses. Failing to reveal an asset, for instance, is regarded as misrepresentation and you will be liable to criminal prosecution. If you’re uncertain of something, talk to your lawyer and spend the time to investigate to make sure that you are supplying the correct information. When it relates to money, there are digital 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 torment 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 fact, transferring assets will not shelter those assets in any way, and may be construed as fraudulent activity which involves criminal repercussions. Selling assets to pay back your debts is, of course, a typical reaction to attempt to ease the financial strain. It’s essential 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 face the probable 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 prior to filing for bankruptcy. You’ll additionally be asked what you did with the money you received 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
Friends and family are there to help in times of distress. If you’re experiencing financial challenges, 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 lot of confusion and can bring about claims of fraud when filing for bankruptcy.
As you can see, there are some significant consequences for relatively minor 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 with somebody about your situation, contact Bankruptcy Experts Penrith on 1300 795 575 or visit https://www.bankruptcyexpertspenrith.com.au