Too many bills? Too much debt? Not nearly enough money? Most individuals struggle financially at some point in their lives. Unexpected events such as hospitalisation, losing a job, and even divorce, can seriously affect your financial situation. Yet, when there is no other way to properly handle your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, demanding, and emotional. Consequently, a lot of people dig themselves a deeper hole before even filing for personal bankruptcy. It’s vital that you ask for professional advice relating to your bankruptcy options. There are particular financial decisions that should be avoided at all costs to avoid damaging your bankruptcy case. This article will provide 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 troubles is to stop using your credit cards. Whilst it is tempting to make smaller purchases like meals and fuel, the fact is that credit cards have extravagant fees which only get compounded when you’re incapable to make repayments. In addition to this, making big purchases with the knowledge that you will soon be going bankrupt is deemed fraud. Naturally, small purchases are okay, but if you deliberately max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will find yourself in a considerably worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. Even though it may appear to be logical to payoff as much debt as possible, the truth is that it can land you in a great deal of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract court actions which will consequently prolong 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 sue the creditor in what’s called a clawback lawsuit. This is undertaken to recoup the money that was paid to the favoured creditor to ensure it can be distributed equally among 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 provide complete and detailed 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, consult with your lawyer and spend the time to investigate to make certain you are giving the correct information. When it concerns money, there are digital trails everywhere, so do not think you can conceal anything. You might get away with it initially, 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 fable. As a matter of fact, transferring assets will not preserve those assets in any way, and may be interpreted as fraudulent activity which involves criminal consequences. Selling assets to pay back your debts is, needless to say, a typical reaction to try to mitigate the financial burden. It’s crucial to remember that your Statement of Financial Affairs is a lawful record, so you must be honest with your financial history or face the possible repercussions of getting caught. You will 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 will additionally be asked what you did with the money you gained from those transfers, so be careful 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 help in times of distress. If you are facing financial challenges, it’s normal for friends and family to give 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 directly income related such as work or dividends. It’s also critical 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 result in claims of fraud when filing for bankruptcy.
As you can see, there are some severe 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 more details or to speak with someone about your circumstances, contact Bankruptcy Experts Darwin on 1300 795 575 or visit https://www.bankruptcyexpertsdarwin.com.au