Too many bills? Too much debt? Not enough money? Most people struggle financially at some point in their lives. Unanticipated situations such as hospitalisation, losing a job, or even divorce, can significantly alter your financial circumstances. Yet, when there’s no other way to properly handle your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, demanding, and emotional. As a result, a lot of individuals dig themselves a deeper hole before even filing for personal bankruptcy. It’s essential that you seek professional advice relating to your bankruptcy options. There are particular financial decisions that should be avoided at all costs to avoid damaging your bankruptcy case. This article will provide some tips on things you should never do before going bankrupt.
Using Credit Cards
The first thing you should do when you are experiencing financial issues is to cease using your credit cards. Even though it is tempting to make smaller purchases like food and petrol, the reality is that credit cards have enormous fees which only get magnified when you’re incapable to make repayments. Along with this, making large purchases with the understanding that you will shortly be going bankrupt is considered fraud. Of course, small purchases are fine, but if you intentionally max out your credit cards prior to filing for bankruptcy, creditors will investigate and you’ll end up in a much worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. Though it may seem logical to pay off 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 court actions which will essentially impede your bankruptcy filing and discharge. Every creditor carries the same weight under Australian Law, so if you completely repay one over another, the bankruptcy trustee will sue 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 between all creditors.
Lie or Withhold 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 detailed information regarding your assets, income, debts, and expenses. Failing to disclose an asset, for example, is considered misrepresentation and you will be liable to criminal prosecution. If you are unsure of anything, speak with your lawyer and spend the time to investigate to make certain you’re giving the correct information. When it concerns money, there are digital trails everywhere, so do not think you can hide anything. You might get away with it initially, 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 spare those assets from bankruptcy is a fantasy. In fact, transferring assets will not shelter those assets in any way, and may be interpreted as fraudulent activity which involves criminal consequences. Selling assets to repay your debts is, obviously, a legitimate response to attempt to ease the financial strain. It’s paramount to remember that your Statement of Financial Affairs is a lawful record, so you must be honest with your financial history or deal with the potential repercussions of getting caught. You will 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 gained 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
Family and friends are there to help in times of distress. If you are facing financial problems, 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 directly income related such as work or dividends. It’s also crucial to keep work related money and personal money completely separate from each other. All of these activities can produce a great deal of confusion and can lead to claims of fraud when filing for bankruptcy.
As you can see, there are some substantial 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. To learn more or to speak with someone about your circumstances, contact Bankruptcy Experts Toowoomba on 1300 795 575 or visit Bankrupt Toowoomba