Too many bills? Too much debt? Not nearly enough money? Many people struggle financially at some point in their lives. Uncontrolled incidents like hospitalisation, losing a job, as well as divorce, can severely transform your financial condition. Yet, when there is no other way to adequately manage your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. Consequently, too many individuals dig themselves a deeper hole before even filing for personal bankruptcy. It’s essential that you seek professional advice regarding your bankruptcy options. There are particular 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 troubles is to stop using your credit cards. While it is tempting to make modest purchases like food and petrol, the truth is that credit cards have extravagant fees which only get intensified when you’re unable to make repayments. In addition to this, making substantial purchases with the knowledge that you will soon be going bankrupt is considered fraud. Naturally, small purchases are fine, but if you intentionally max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will wind up in a substantially worse position.
Repay Favoured Creditors
When you have unmanageable debt, do not repay any creditors before you file for bankruptcy. Even though it may seem practical to settle 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 court actions which will ultimately delay your bankruptcy filing and discharge. Each and every 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 recover the money that was paid to the favoured creditor so that it can be dispersed equally amongst all creditors.
Lie or Withhold any Information
Whatever you do, do not lie or withhold any information regarding your financial situation. When you file for bankruptcy, you are required by Law to supply complete and detailed information relating to 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 are unclear of something, speak to your lawyer and spend the time to investigate to make sure that you are providing the correct information. When it involves money, there are electronic trails just about everywhere, so don’t think you can hide 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 family member’s name to save those assets from bankruptcy is a fantasy. In fact, transferring assets will not protect those assets in any way, and may be interpreted as fraudulent activity which comes with criminal repercussions. Selling assets to settle your debts is, needless to say, a common reaction to try to reduce the financial burden. It’s paramount to keep in mind that your Statement of Financial Affairs is a legal document, so you must be honest with your financial history or face the possible consequences of getting caught. You will 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 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’re grappling with financial problems, it’s typical 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 specifically income related such as work or dividends. It’s also important to keep work related money and personal money entirely 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 serious consequences for relatively insignificant 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. To learn more or to talk to somebody about your circumstances, contact Bankruptcy Experts Townsville on 1300 795 575 or visit http://www.bankruptcyexpertstownsville.com.au