Lots of bills? Too much debt? Not nearly enough money? Many people struggle financially at some point in their lives. Unforeseen situations like hospitalisation, losing a job, as well as divorce, can seriously reshape your financial condition. But, when there’s no other way to suitably handle your debts, some people are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, traumatic, and emotional. As a result, too many individuals dig themselves a deeper hole before even filing for personal bankruptcy. It’s crucial that you ask for professional advice regarding 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 very first thing you should do when you are experiencing financial dilemmas is to cease using your credit cards. Whilst it is tempting to make small purchases like food and fuel, the truth is that credit cards have outrageous fees which only get intensified when you’re incapable to make repayments. Along with this, making big purchases with the understanding that you will shortly be going bankrupt is deemed fraud. Naturally, small purchases are okay, but if you intentionally max out your credit cards prior to filing for bankruptcy, creditors will investigate and you’ll end up in a considerably worse position.
Repay Favoured Creditors
When you have unmanageable debt, do not repay any creditors before you file for bankruptcy. While it may appear to be practical to settle 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 court 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 undertaken to recoup the money that was paid to the favoured creditor to ensure it can be distributed 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 supply complete and specific information relating to your assets, income, debts, and expenses. Failing to disclose an asset, for instance, is regarded as misrepresentation and you will be liable to criminal prosecution. If you are unclear of anything, talk with your lawyer and spend the time to investigate to guarantee you are providing the correct information. When it relates to money, there are electronic trails just about everywhere, so don’t think you can hide anything. You might get away with it initially, but it can torment you and your case later down the track.
Transfer or Move Assets
Transferring or moving assets to a family member’s name to spare those assets from bankruptcy is a myth. In reality, 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 legitimate response to attempt to mitigate the financial burden. It’s vital to bear in mind that your Statement of Financial Affairs is a legal document, so you must be honest with your financial history or deal with the potential consequences 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 will additionally be asked what you did with the money you gained from those transfers, so be wary 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 encountering financial adversity, it’s normal for friends and family to give money to you to relieve 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 essential to keep work related money and personal money totally separate from each other. All of these activities can produce a great deal of confusion and can bring about claims of fraud when filing for bankruptcy.
As you can see, there are some substantial consequences for relatively minor financial decisions when you go bankrupt. To make sure you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For more details or to speak to someone about your circumstances, contact Bankruptcy Experts Rockingham on 1300 795 575 or visit http://www.bankruptcyexpertsrockingham.com.au