Too many bills? Too much debt? Not nearly enough money? Lots of people struggle financially at some point in their lives. Uncontrolled events such as hospitalisation, redundancy, or even divorce, can drastically alter your financial circumstances. But, when there’s no other way to effectively cope with your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. Consequently, a lot of people dig themselves a deeper hole before even filing for personal bankruptcy. It is essential that you ask for professional advice pertaining to your bankruptcy options. There are a number of financial decisions that should be avoided at all costs to avoid ruining your bankruptcy case. This article will present some tips on things you should never do before going bankrupt.
Using Credit Cards
The first thing you should do when you’re having financial problems is to cease using your credit cards. Even though it is tempting to make smaller purchases like meals and petrol, the reality is that credit cards have outrageous fees which only get compounded when you’re unable to make repayments. Along with this, making big purchases with the understanding that you will soon be going bankrupt is deemed fraud. Needless to say, small purchases are fine, but if you deliberately max out your credit cards before filing for bankruptcy, creditors will investigate and you will 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. Though it may sound logical to payoff as much debt as possible, the truth 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 inevitably prolong 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 recover the money that was paid to the favoured creditor to ensure it can be distributed equally amongst all creditors.
Lie or Conceal any Information
Whatever you do, do not lie or withhold any information pertaining 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 uncertain of something, talk with your lawyer and spend the time to investigate to make sure you’re supplying 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 haunt you and your case later down the track.
Transfer or Move Assets
Transferring or moving assets to a relative’s name to rescue those assets from bankruptcy is a fallacy. As a matter of fact, transferring assets will not preserve those assets at all, and may be taken as fraudulent activity which involves criminal repercussions. Selling assets to repay your debts is, obviously, a common response to attempt to mitigate the financial strain. It’s paramount to keep in mind that your Statement of Financial Affairs is a legal document, so you must be completely honest with your financial history or confront the potential repercussions of getting caught. You’ll be asked by the trustee if you sold, transferred or gave away any assets, normally for a period of one year before filing for bankruptcy. You’ll 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 assist in times of need. If you are facing financial challenges, 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 likewise imperative to keep work related money and personal money completely separate from each other. All of these activities can create a considerable amount of confusion and can trigger 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. To learn more or to speak with someone about your circumstances, contact Bankruptcy Experts Perth on 1300 795 575 or visit Bankruptcy Perth