Top Things You Should NOT Do Before Going Bankrupt
Lots of bills? Too much debt? Not enough money? Lots of people struggle financially at some point in their lives. Uncontrolled events such as hospitalisation, redundancy, or even divorce, can severely transform your financial circumstances. But, when there is no other way to adequately manage your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. As a result, too many folks dig themselves a deeper hole before even filing for personal bankruptcy. It is essential that you seek professional advice regarding your bankruptcy options. There are certain financial decisions that should be avoided at all costs to avoid ruining your bankruptcy case. This article will offer some tips on things you should never do before going bankrupt.
Using Credit Cards
The first thing you should do when you are having financial troubles is to stop using your credit cards. Whilst it is tempting to make modest purchases like food and petrol, the fact is that credit cards have inflated fees which only get magnified when you are unable to make repayments. Alongside this, making big purchases with the understanding that you will shortly be going bankrupt is considered fraud. Needless to say, small purchases are fine, but if you purposely max out your credit cards before filing for bankruptcy, creditors will investigate and you will wind up in a considerably worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. Even though it may appear to be practical to pay off as much debt as possible, the reality 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 lawsuits 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 sue the creditor in what’s called a clawback lawsuit. This is carried out 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 conceal any information regarding your financial situation. When you file for bankruptcy, you are required by Law to provide complete and detailed information concerning your assets, income, debts, and expenses. Failing to disclose an asset, for instance, is considered misrepresentation and you will be liable to criminal prosecution. If you’re uncertain of something, speak with your lawyer and spend the time to investigate to guarantee you’re giving the correct information. When it relates to money, there are electronic trails almost 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 preserve those assets from bankruptcy is a fallacy. In reality, transferring assets will not shield those assets in any way, and may be deciphered as fraudulent activity which involves criminal repercussions. Selling assets to pay off your debts is, needless to say, a natural reaction to try to relieve the financial strain. It’s important to bear 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, usually for a period of one year prior to filing for bankruptcy. You will 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
Family and friends are there to help in times of distress. If you’re facing financial distress, it’s common for family and friends to give money to you to mitigate 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 imperative to keep work related money and personal money entirely separate from each other. All of these activities can create a lot of confusion and can bring about 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 talk with somebody about your circumstances, contact Bankruptcy Experts Bunbury on 1300 795 575 or visit http://www.bankruptcyexpertsbunbury.com.au