Lots of bills? Too much debt? Not nearly enough money? Most individuals struggle financially at some point in their lives. Unforeseen situations such as hospitalisation, redundancy, or even divorce, can severely affect your financial situation. Yet, when there is no other way to adequately cope with your debts, some people are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, stressful, and emotional. As a result, a lot of individuals dig themselves a deeper hole before even filing for personal bankruptcy. It’s imperative 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 damaging your bankruptcy case. This article will offer some tips on things you should never do before going bankrupt.
Using Credit Cards
The very first thing you should do when you’re facing financial problems is to cease using your credit cards. Even though it is tempting to make small purchases like food and petrol, the fact is that credit cards have extravagant fees which only get magnified when you are incapable to make repayments. In addition to this, making large purchases with the understanding that you will soon be going bankrupt is considered fraud. Obviously, small purchases are fine, but if you intentionally 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 unmanageable debt, do not repay any creditors before you file for bankruptcy. Although it may appear to be practical to repay as much debt as possible, the truth 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 legal actions which will ultimately postpone your bankruptcy filing and discharge. Each 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 recuperate the money that was paid to the favoured creditor so that it can be distributed equally amongst all creditors.
Lie or Withhold 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 present complete and detailed information concerning your assets, income, debts, and expenses. Failing to disclose an asset, for example, is regarded as misrepresentation and you will be liable to criminal prosecution. If you’re unsure of something, speak with your lawyer and spend the time to investigate to guarantee you are providing the correct information. When it relates to money, there are digital trails everywhere, so don’t think you can conceal 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 rescue those assets from bankruptcy is a misconception. In reality, transferring assets will not protect those assets whatsoever, and may be deciphered as fraudulent activity which comes with criminal consequences. Selling assets to pay back your debts is, obviously, a typical response to attempt to alleviate the financial strain. It’s crucial to keep in mind that your Statement of Financial Affairs is a legal record, so you must be straightforward with your financial history or face the possible repercussions 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 additionally be asked what you did with the money you received from those transfers, so be careful of a preferential transfer, particularly 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 dealing with financial problems, it’s common 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 completely separate from each other. All of these activities can create a considerable amount of confusion and can bring about claims of fraud when filing for bankruptcy.
As you can see, there are some significant 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 speak to someone about your situation, contact Bankruptcy Experts Maitland on 1300 795 575 or visit http://www.bankruptcyexpertsmaitland.com.au