Lots of bills? Too much debt? Not enough money? Many people struggle financially at some point in their lives. Uncontrolled incidents like hospitalisation, losing a job, or even divorce, can significantly reshape your financial circumstances. Yet, when there’s no other way to suitably handle your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. As a result, lots of people dig themselves a deeper hole before even filing for personal bankruptcy. It’s critical that you seek professional advice regarding your bankruptcy options. There are particular financial decisions that should be avoided at all costs to avoid wreaking havoc on 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 having financial troubles is to stop using your credit cards. Even though it is tempting to make modest purchases like meals and fuel, the reality is that credit cards have excessively high fees which only get intensified when you are not able to make repayments. In addition to this, making substantial purchases with the knowledge that you will soon be going bankrupt is considered fraud. Naturally, small purchases are fine, but if you purposely max out your credit cards before filing for bankruptcy, creditors will investigate and you will end up in a significantly worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. Although it may seem reasonable 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 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 done to recuperate the money that was paid to the favoured creditor to ensure that it can be dispersed equally amongst all creditors.
Lie or Conceal any Information
Whatever you do, do not lie or conceal any information regarding your financial situation. When you file for bankruptcy, you are required by Law to provide complete and proper information relating 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’re unclear of anything, speak to your lawyer and spend the time to investigate to make certain you are supplying the correct information. When it relates to money, there are electronic trails everywhere, so do not think you can hide 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 spare those assets from bankruptcy is a delusion. As a matter of fact, transferring assets will not preserve those assets at all, and may be construed as fraudulent activity which involves criminal consequences. Selling assets to pay off your debts is, by all means, a natural reaction to try to ease the financial strain. 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 deal with the possible repercussions of getting caught. You’ll 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 even be asked what you did with the money you obtained 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
Family and friends are there to help in times of need. If you’re facing financial hardship, it’s normal for family and friends to offer money to you to lessen the burden. Do not deposit any money from friends or relatives into your bank account, or any money that is not directly income related such as work or dividends. It’s also essential to keep work related money and personal money completely separate from each other. All of these activities can create a lot of confusion and can trigger 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 make certain you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For more information or to speak to somebody about your circumstances, contact Bankruptcy Experts Port Macquarie on 1300 795 575 or visit http://www.bankruptcyexpertsportmacquarie.com.au