Top Things You Should NOT Do Before Going Bankrupt
Lots of bills? Too much debt? Not nearly enough money? Many people struggle financially at some point in their lives. Unforeseen situations like hospitalisation, redundancy, and even divorce, can significantly alter your financial situation. Yet, when there is no other way to suitably handle your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, stressful, and emotional. As a result, lots of individuals dig themselves a deeper hole before even filing for personal bankruptcy. It’s crucial that you ask for professional advice pertaining to your bankruptcy options. There are certain 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 very first thing you should do when you are having financial issues is to cease using your credit cards. Even though it is tempting to make modest purchases like food and fuel, the truth is that credit cards have inflated fees which only get compounded when you’re not able to make repayments. Alongside this, making large purchases with the knowledge that you will soon be going bankrupt is deemed fraud. Needless to say, small purchases are fine, but if you purposely max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will end up in a significantly worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. While it may seem sensible to payoff as much debt as possible, the truth 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 lawsuits which will inevitably delay your bankruptcy filing and discharge. Each and 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 carried out to recover the money that was paid to the favoured creditor to ensure it can be allocated 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 supply complete and specific information relating to 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 unclear of anything, talk with your lawyer and spend the time to investigate to make sure you are giving the correct information. When it relates to 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 relative’s name to spare those assets from bankruptcy is a delusion. 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 back your debts is, obviously, a typical reaction to attempt to reduce the financial burden. It’s important to keep in mind that your Statement of Financial Affairs is a legal record, so you must be completely honest with your financial history or deal with the probable 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 prior to filing for bankruptcy. You’ll also be asked what you did with the money you obtained 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 help in times of distress. If you’re encountering financial problems, it’s normal for friends and family to offer 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 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 serious 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 talk with someone about your situation, contact Bankruptcy Experts Wollongong on 1300 795 575 or visit http://www.bankruptcyexpertswollongong.com.au