Lots of bills? Too much debt? Not enough money? Most people struggle financially at some point in their lives. Uncontrolled situations like hospitalisation, redundancy, or even divorce, can drastically reshape your financial circumstances. But, when there’s no other way to adequately control your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. As a result, lots of people dig themselves a deeper hole before even filing for personal bankruptcy. It’s imperative that you seek professional advice relating to your bankruptcy options. There are a number of 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 are experiencing financial problems is to cease using your credit cards. Even though it is tempting to make smaller purchases like food and fuel, the reality is that credit cards have exorbitant fees which only get intensified when you are unable to make repayments. Along with this, making substantial purchases with the understanding that you will soon be going bankrupt is considered fraud. Needless to say, small purchases are fine, but if you deliberately max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will find yourself in a substantially worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. While it may seem 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 legal actions which will ultimately prolong your bankruptcy filing and discharge. Each creditor holds the same weight under Australian Law, so if you completely repay one over another, the bankruptcy trustee will file a claim against the creditor in what’s called a clawback lawsuit. This is undertaken to recover the money that was paid to the favoured creditor so 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 present complete and specific information pertaining 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 not sure of something, speak with your lawyer and spend the time to investigate to make sure you’re supplying the correct information. When it involves money, there are electronic trails just about everywhere, so do not think you can conceal anything. You might get away with it initially, 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 protect those assets from bankruptcy is a myth. As a matter of fact, transferring assets will not preserve those assets at all, and may be taken as fraudulent activity which comes with criminal repercussions. Selling assets to repay your debts is, by all means, a legitimate response to attempt to alleviate the financial burden. It’s important to bear in mind that your Statement of Financial Affairs is a lawful document, so you must be completely 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 prior to filing for bankruptcy. You will likewise be asked what you did with the money you acquired from those transfers, so be wary of a preferential transfer, especially with friends and family members.
Deposit Non-Income Earning Money Into Your Bank Account
Family and friends are there to assist in times of distress. If you are facing financial difficulty, it’s common for family and friends to offer money to you to relieve 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 entirely separate from each other. All of these activities can produce 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 guarantee you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For additional information or to talk with somebody about your circumstances, contact Bankruptcy Experts Alice Springs on 1300 795 575 or visit https://www.bankruptcyexpertsalicesprings.com.au