Lots of bills? Too much debt? Not enough money? Many people struggle financially at some point in their lives. Unforeseen incidents such as hospitalisation, losing a job, and even divorce, can significantly alter your financial circumstances. Yet, when there’s no other way to effectively handle your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. Consequently, a lot of folks dig themselves a deeper hole before even filing for personal bankruptcy. It’s vital that you ask for professional advice regarding your bankruptcy options. There are certain financial decisions that should be avoided at all costs to avoid wreaking havoc on 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 are experiencing financial problems is to cease using your credit cards. Whilst it is tempting to make small purchases like meals and fuel, the truth is that credit cards have extravagant fees which only get exacerbated when you are incapable to make repayments. Along with this, making substantial purchases with the knowledge that you will soon be going bankrupt is deemed fraud. Naturally, small purchases are fine, but if you intentionally max out your credit cards before filing for bankruptcy, creditors will investigate and you’ll wind up in a considerably worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. Even though it may appear to be 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 court actions which will ultimately 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 take legal action against the creditor in what’s called a clawback lawsuit. This is done to recover the money that was paid to the favoured creditor to ensure that it can be distributed equally between all creditors.
Lie or Withhold 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 provide complete and specific information concerning your assets, income, debts, and expenses. Failing to acknowledge an asset, for example, is regarded as misrepresentation and you will be liable to criminal prosecution. If you are unsure of something, talk with your lawyer and spend the time to investigate to ensure you are giving the correct information. When it concerns money, there are computerised trails pretty much everywhere, so don’t think you can conceal anything. You might get away with it in the first instance, but it can plague 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 delusion. As a matter of fact, transferring assets will not preserve those assets in any way, and may be taken as fraudulent activity which comes with criminal consequences. Selling assets to pay back your debts is, by all means, a natural reaction to try to mitigate the financial burden. It’s imperative to bear in mind that your Statement of Financial Affairs is a legal record, so you must be honest with your financial history or deal with the probable consequences of getting caught. You will 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’ll also be asked what you did with the money you obtained 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 experiencing 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 specifically income related such as work or dividends. It’s also essential to keep work related money and personal money entirely 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 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 information or to speak with somebody about your circumstances, contact Bankruptcy Experts Wyong on 1300 795 575 or visit http://www.bankruptcyexpertswyong.com.au