Lots of bills? Too much debt? Not nearly enough money? Most people struggle financially at some point in their lives. Unforeseen incidents like hospitalisation, job loss, or even divorce, can drastically affect your financial circumstances. Yet, when there’s no other way to properly cope with your debts, some people are forced to file for bankruptcy.
Going bankrupt is never simple. It’s complicated, stressful, and emotional. Consequently, too many people dig themselves a deeper hole before even filing for personal bankruptcy. It’s critical that you ask for professional advice pertaining to 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 offer some tips on things you should never do before going bankrupt.
Using Credit Cards
The first thing you should do when you’re experiencing financial issues is to cease using your credit cards. Even though it is tempting to make modest purchases like meals and fuel, the fact is that credit cards have outrageous fees which only get magnified when you’re unable to make repayments. Along with this, making substantial purchases with the knowledge that you will soon be going bankrupt is deemed fraud. Of course, 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 unmanageable debt, do not repay any creditors before you file for bankruptcy. While it may appear to be logical to settle as much debt as possible, the reality is that it can land you in a lot of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract lawsuits which will consequently 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 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 distributed equally between all creditors.
Lie or Conceal any Information
Whatever you do, do not lie or conceal any information pertaining to your financial situation. When you file for bankruptcy, you are required by Law to provide complete and accurate information relating to 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 are uncertain of something, consult with your lawyer and spend the time to investigate to make sure you’re giving the correct information. When it concerns money, there are computerised trails almost everywhere, so do not think you can conceal anything. You might get away with it in the first instance, but it can haunt 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 fantasy. In fact, transferring assets will not shield those assets at all, and may be construed as fraudulent activity which comes with criminal consequences. Selling assets to settle your debts is, of course, a common response to attempt to mitigate the financial strain. It’s imperative to keep in mind that your Statement of Financial Affairs is a lawful document, so you must be honest with your financial history or deal with the probable repercussions 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 likewise be asked what you did with the money you collected 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 assist in times of distress. If you’re grappling with financial hardship, it’s typical for friends and family to give money to you to lessen 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 essential to keep work related money and personal money completely 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 trivial 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. For more details or to speak with somebody about your circumstances, contact Bankruptcy Melbourne on 1300 818 575 or visit http://www.bankruptcy-melbourne.com.au/