Lots of bills? Too much debt? Not enough money? Lots of people struggle financially at some point in their lives.
Unexpected events such as hospitalisation, losing a job, and even divorce, can seriously transform your financial condition.
Yet, when there is no other way to adequately cope with your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, demanding, and emotional. Consequently, lots of people dig themselves a deeper hole before even filing for personal bankruptcy.
It is essential 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 first thing you should do when you’re experiencing financial troubles is to stop using your credit cards.
While it is tempting to make small purchases like food and fuel, the truth is that credit cards have outrageous fees which only get compounded when you’re incapable to make repayments.
Alongside this, making big purchases with the understanding that you will shortly be going bankrupt is considered fraud. Obviously, small purchases are fine, but if you purposely max out your credit cards before filing for bankruptcy, creditors will investigate and you’ll find yourself in a considerably worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy.
Even though it may appear to be reasonable to settle as much debt as possible, the reality 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 legal actions which will inevitably delay your bankruptcy filing and discharge.
Each and every creditor holds 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 carried out to recoup the money that was paid to the favoured creditor to ensure it can be spread equally between all creditors.
Lie or Conceal any Information
Whatever you do, do not lie or conceal any information relating to your financial situation. When you file for bankruptcy, you are required by Law to provide complete and detailed information pertaining to your assets, income, debts, and expenses. Failing to acknowledge an asset, for example, is regarded as misrepresentation and you will be liable to criminal prosecution. If you’re not sure of anything, speak to your lawyer and spend the time to investigate to guarantee you’re supplying the correct information. When it concerns money, there are digital trails everywhere, so don’t 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 relative’s name to preserve those assets from bankruptcy is a myth. As a matter of 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 settle your debts is, obviously, a common reaction to try to alleviate the financial burden. It’s imperative to keep in mind that your Statement of Financial Affairs is a lawful document, so you must be honest with your financial history or face the probable repercussions of getting caught. You will be asked by the trustee if you sold, transferred or gave away any assets, normally for a period of one year prior to filing for bankruptcy. You’ll likewise 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 assist in times of distress. If you are experiencing financial challenges, it’s typical for family and friends to offer money to you to mitigate 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 imperative to keep work related money and personal money totally separate from each other. All of these activities can produce a considerable amount of confusion and can lead to claims of fraud when filing for bankruptcy.
As you can see, there are some significant consequences for relatively trivial 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 additional information or to talk to somebody about your situation, contact Bankruptcy Experts on 1300 795 575 or visit bankruptcyexpertssydney.com.au