Too many bills? Too much debt? Not enough money? Most individuals struggle financially at some point in their lives. Uncontrolled incidents such as hospitalisation, redundancy, and also divorce, can significantly reshape your financial circumstances. But, when there’s no other way to effectively control your debts, some people are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, traumatic, and emotional. Consequently, lots of folks dig themselves a deeper hole before even filing for personal bankruptcy. It is imperative that you ask for professional advice concerning your bankruptcy options. There are a number of 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 experiencing financial problems is to stop using your credit cards. Even though it is tempting to make smaller purchases like meals and petrol, the reality is that credit cards have excessively high fees which only get magnified when you are not able to make repayments. Alongside this, making big purchases with the knowledge that you will soon be going bankrupt is deemed fraud. Needless to say, small purchases are fine, but if you intentionally max out your credit cards prior to filing for bankruptcy, creditors will investigate and you will find yourself in a substantially worse position.
Repay Favoured Creditors
When you have unmanageable debt, do not repay any creditors before you file for bankruptcy. Although it may sound logical to repay as much debt as possible, the fact 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 impede 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 file a claim against the creditor in what’s called a clawback lawsuit. This is done to recuperate the money that was paid to the favoured creditor so that it can be spread equally amongst 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 present complete and specific information concerning your assets, income, debts, and expenses. Failing to reveal an asset, for instance, is regarded as misrepresentation and you will be liable to criminal prosecution. If you’re not sure of something, speak to your lawyer and spend the time to investigate to make certain you are providing the correct information. When it involves money, there are digital trails everywhere, so do not think you can conceal anything. You might get away with it in the first instance, but it can torment 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 misconception. In reality, transferring assets will not shield those assets whatsoever, and may be interpreted as fraudulent activity which involves criminal repercussions. Selling assets to pay off your debts is, of course, a common reaction to attempt to ease the financial burden. It’s essential to remember that your Statement of Financial Affairs is a lawful record, so you must be completely 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 will additionally be asked what you did with the money you received 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 assist in times of distress. If you’re grappling with financial difficulty, it’s common for friends and family to offer money to you to relieve 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 imperative 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 lead to claims of fraud when filing for bankruptcy.