Lots of bills? Too much debt? Not enough money? Many people struggle financially at some point in their lives. Unforeseen situations such as hospitalisation, losing a job, and also divorce, can drastically transform your financial circumstances. But, when there’s no other way to effectively cope with your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, demanding, and emotional. As a result, a lot of people dig themselves a deeper hole before even filing for personal bankruptcy. It is 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 damaging 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’re experiencing financial problems is to cease using your credit cards. Whilst it is tempting to make modest purchases like meals and fuel, the truth is that credit cards have enormous fees which only get intensified when you’re not able to make repayments. Alongside this, making big purchases with the knowledge that you will shortly be going bankrupt is considered fraud. Obviously, 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. While it may appear to be practical 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 lawsuits which will inevitably postpone your bankruptcy filing and discharge. Each 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 so that it can be spread equally among all creditors.
Lie or Conceal any Information
Whatever you do, do not lie or withhold 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 unsure of something, speak with your lawyer and spend the time to investigate to guarantee you’re providing the correct information. When it comes to money, there are electronic trails everywhere, so do not think you can hide anything. You might get away with it in the first instance, but it can torment you and your case later down the track.
Transfer or Move Assets
Transferring or moving assets to a relative’s name to save those assets from bankruptcy is a fantasy. As a matter of fact, transferring assets will not shield those assets at all, and may be construed as fraudulent activity which comes with criminal consequences. Selling assets to pay back your debts is, obviously, a legitimate response to attempt to relieve the financial burden. It’s paramount 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 possible consequences 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’ll even 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’re experiencing financial problems, it’s typical for friends and family to offer money to you to reduce 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 vital to keep work related money and personal money entirely separate from each other. All of these activities can produce a great deal of confusion and can trigger claims of fraud when filing for bankruptcy.
As you can see, there are some significant consequences for relatively insignificant 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 to somebody about your situation, contact Bankruptcy Experts Fremantle on 1300 795 575 or visit http://www.bankruptcyexpertsfremantle.com.au