Top Things You Should NOT Do Prior to Going Bankrupt
Lots of bills? Too much debt? Not enough money? Most individuals struggle financially at some point in their lives. Unforeseen incidents like hospitalisation, redundancy, and even divorce, can seriously alter your financial circumstances. But, when there’s no other way to suitably handle your debts, some folks are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, traumatic, and emotional. As a result, a lot of people dig themselves a deeper hole before even filing for personal bankruptcy. It is imperative that you ask for professional advice regarding 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 provide some tips on things you should never do before going bankrupt.
Using Credit Cards
The very first thing you should do when you’re facing financial dilemmas is to cease using your credit cards. Whilst it is tempting to make smaller purchases like food and fuel, the reality is that credit cards have inflated fees which only get compounded when you’re incapable to make repayments. Along with this, making big purchases with the understanding that you will shortly be going bankrupt is considered fraud. Naturally, small purchases are okay, but if you purposely max out your credit cards before filing for bankruptcy, creditors will investigate and you will end up in a significantly worse position.
Repay Favoured Creditors
When you have uncontrollable debt, do not repay any creditors before you file for bankruptcy. Although it may appear to be logical to repay as much debt as possible, the truth 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 consequently postpone your bankruptcy filing and discharge. Every creditor carries 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 done to recoup the money that was paid to the favoured creditor to ensure it can be spread equally between all creditors.
Lie or Conceal 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 provide complete and proper information relating to your assets, income, debts, and expenses. Failing to reveal an asset, for instance, is considered misrepresentation and you will be liable to criminal prosecution. If you are not sure of something, speak with your lawyer and spend the time to investigate to make sure that you are providing the correct information. When it relates to money, there are digital trails everywhere, so do not 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 preserve those assets from bankruptcy is a myth. In reality, transferring assets will not preserve those assets at all, and may be construed as fraudulent activity which comes with criminal consequences. Selling assets to pay back your debts is, needless to say, a common reaction to try to relieve the financial strain. It’s essential to remember that your Statement of Financial Affairs is a legal record, so you must be 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, usually for a period of one year before filing for bankruptcy. You’ll even be asked what you did with the money you obtained 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 encountering financial hardship, 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 likewise important to keep work related money and personal money totally separate from each other. All of these activities can produce a lot of confusion and can bring about claims of fraud when filing for bankruptcy.
As you can see, there are some serious consequences for relatively minor financial decisions when you go bankrupt. To make sure you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. To learn more or to talk with somebody about your situation, contact Bankruptcy Experts Geelong on 1300 795 575 or visit http://www.bankruptcyexpertsgeelong.com.au