Top Things You Should NOT Do Prior to Going Bankrupt
Too many bills? Too much debt? Not nearly enough money? Most people struggle financially at some point in their lives. Unexpected situations like hospitalisation, job loss, as well as divorce, can severely alter your financial situation. Yet, when there is no other way to appropriately control your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, traumatic, and emotional. As a result, lots of individuals dig themselves a deeper hole before even filing for personal bankruptcy. It’s vital that you seek professional advice concerning your bankruptcy options. There are a number of 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 facing financial troubles is to cease using your credit cards. Whilst it is tempting to make small purchases like food and petrol, the truth is that credit cards have outrageous fees which only get intensified when you are not able to make repayments. Along with this, making big purchases with the understanding that you will soon be going bankrupt is considered fraud. Of course, small purchases are fine, but if you purposely max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will find yourself in a significantly worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. While it may sound reasonable to pay off as much debt as possible, the reality 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 court actions which will ultimately postpone 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 done to recoup the money that was paid to the favoured creditor to ensure it can be spread equally between all creditors.
Lie or Withhold any Information
Whatever you do, do not lie or conceal any information concerning your financial situation. When you file for bankruptcy, you are required by Law to provide complete and accurate information relating to your assets, income, debts, and expenses. Failing to reveal an asset, for example, is considered misrepresentation and you will be liable to criminal prosecution. If you’re unclear of something, speak to your lawyer and spend the time to investigate to make certain you’re giving the correct information. When it involves money, there are digital trails almost everywhere, so do not 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 family member’s name to protect those assets from bankruptcy is a fallacy. In fact, transferring assets will not preserve those assets at all, and may be deciphered as fraudulent activity which comes with criminal repercussions. Selling assets to pay off your debts is, by all means, a typical response to try to mitigate the financial strain. It’s critical to remember that your Statement of Financial Affairs is a lawful record, so you must be completely honest with your financial history or deal with the potential 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 before filing for bankruptcy. You will additionally be asked what you did with the money you acquired 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
Family and friends are there to help in times of distress. If you are facing financial distress, it’s common for friends and family to give money to you to ease 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 create a lot of confusion and can result in 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 guarantee you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For more information or to speak to someone about your circumstances, contact Bankruptcy Experts Australia on 1300 795 575 or visit http://www.bankruptcyexpertsaustralia.com.au