Too many bills? Too much debt? Not enough money? Most individuals struggle financially at some point in their lives. Uncontrolled events like hospitalisation, losing a job, and also divorce, can severely transform your financial condition. But, when there’s no other way to suitably cope with your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, demanding, and emotional. Consequently, a lot of people dig themselves a deeper hole before even filing for personal bankruptcy. It’s essential that you seek professional advice concerning your bankruptcy options. There are various 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’re experiencing financial dilemmas is to stop using your credit cards. While it is tempting to make smaller purchases like food and petrol, the reality is that credit cards have inflated fees which only get intensified when you’re incapable to make repayments. Along with this, making big purchases with the understanding that you will soon be going bankrupt is considered fraud. Of course, small purchases are okay, but if you deliberately max out your credit cards prior to filing for bankruptcy, creditors will investigate and you’ll wind up in a substantially worse position.
Repay Favoured Creditors
When you have unmanageable debt, do not repay any creditors before you file for bankruptcy. Though it may appear to be practical to pay off as much debt as possible, the fact is that it can land you in a considerable amount of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract legal actions which will essentially delay your bankruptcy filing and discharge. Each and every creditor carries 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 undertaken to recuperate the money that was paid to the favoured creditor to ensure that it can be distributed equally amongst all creditors.
Lie or Withhold any Information
Whatever you do, do not lie or conceal any information pertaining 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 disclose an asset, for instance, is considered misrepresentation and you will be liable to criminal prosecution. If you are unsure of anything, speak to your lawyer and spend the time to investigate to guarantee you are supplying the correct information. When it relates to money, there are computerised trails almost 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 protect those assets from bankruptcy is a myth. In fact, transferring assets will not protect those assets in any way, and may be interpreted as fraudulent activity which comes with criminal repercussions. Selling assets to settle your debts is, by all means, a natural response to attempt to ease the financial strain. It’s essential to bear in mind that your Statement of Financial Affairs is a lawful document, so you must be straightforward with your financial history or face the likely 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 will also 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
Family and friends are there to assist in times of need. If you’re dealing with financial distress, 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 crucial to keep work related money and personal money entirely separate from each other. All of these activities can produce a considerable amount of confusion and can bring about claims of fraud when filing for bankruptcy.
As you can see, there are some severe consequences for relatively minor financial decisions when you go bankrupt. To ensure you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For more details or to talk to someone about your situation, contact Bankruptcy Experts Frankston on 1300 795 575 or visit https://www.bankruptcyexpertsfrankston.com.au