Lots of bills? Too much debt? Not enough money? Most people struggle financially at some point in their lives. Unanticipated incidents like hospitalisation, losing a job, or even divorce, can greatly reshape your financial condition. But, when there’s no other way to properly handle your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, stressful, and emotional. Consequently, a lot of individuals 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 particular financial decisions that should be avoided at all costs to avoid wreaking havoc on 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 experiencing financial problems is to cease using your credit cards. Whilst it is tempting to make smaller purchases like food and petrol, the fact is that credit cards have exorbitant fees which only get exacerbated when you’re not able to make repayments. In addition to this, making large purchases with the understanding that you will soon be going bankrupt is deemed fraud. Naturally, small purchases are okay, but if you intentionally max out your credit cards prior to filing for bankruptcy, creditors will investigate and you’ll find yourself in a much worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. Though it may seem logical to repay 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 impede 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 take legal action against the creditor in what’s called a clawback lawsuit. This is done to recuperate the money that was paid to the favoured creditor to ensure that it can be allocated equally among all creditors.
Lie or Withhold 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 present complete and detailed information concerning your assets, income, debts, and expenses. Failing to disclose an asset, for example, is regarded as misrepresentation and you will be liable to criminal prosecution. If you’re unsure of anything, talk with your lawyer and spend the time to investigate to make sure that you’re giving the correct information. When it involves 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 haunt 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 misconception. As a matter of fact, transferring assets will not shelter those assets in any way, and may be taken as fraudulent activity which comes with criminal consequences. Selling assets to pay off your debts is, by all means, a typical reaction to try to reduce the financial burden. It’s imperative to bear in mind that your Statement of Financial Affairs is a lawful document, so you must be honest with your financial history or deal with the likely repercussions of getting caught. You’ll be asked by the trustee if you sold, transferred or gave away any assets, usually for a period of one year prior to filing for bankruptcy. You’ll likewise 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 help in times of distress. If you are facing financial hardship, it’s common 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 also crucial to keep work related money and personal money completely separate from each other. All of these activities can produce a lot of confusion and can lead to claims of fraud when filing for bankruptcy.
As you can see, there are some serious consequences for relatively insignificant financial decisions when you go bankrupt. To make certain 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 Lismore on 1300 795 575 or visit http://www.bankruptcyexpertslismore.com.au