Top Things You Should NOT Do Prior to Going Bankrupt
Lots of bills? Too much debt? Not nearly enough money? Most people struggle financially at some point in their lives. Unexpected incidents like hospitalisation, losing a job, as well as divorce, can greatly alter your financial circumstances. But, when there’s no other way to effectively manage your debts, some people are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, demanding, and emotional. Consequently, a lot of individuals dig themselves a deeper hole before even filing for personal bankruptcy. It’s critical that you ask for professional advice relating to your bankruptcy options. There are various financial decisions that should be avoided at all costs to avoid ruining your bankruptcy case. This article will provide some tips on things you should never do before going bankrupt.
Using Credit Cards
The first thing you should do when you are facing financial problems is to cease using your credit cards. Whilst it is tempting to make modest purchases like meals and petrol, the truth is that credit cards have exorbitant fees which only get exacerbated when you are incapable to make repayments. In addition to this, making large purchases with the knowledge that you will soon be going bankrupt is considered fraud. Obviously, small purchases are okay, but if you intentionally max out your credit cards before filing for bankruptcy, creditors will investigate and you’ll end up in a much worse position.
Repay Favoured Creditors
When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. Even though it may sound logical to repay as much debt as possible, the reality 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 prolong your bankruptcy filing and discharge. 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 undertaken to recoup the money that was paid to the favoured creditor to ensure that it can be spread equally between all creditors.
Lie or Withhold 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 present complete and accurate information regarding 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 unsure of something, speak with your lawyer and spend the time to investigate to ensure you are providing the correct information. When it comes to money, there are digital trails just about everywhere, so do not think you can hide 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 protect those assets from bankruptcy is a fantasy. As a matter of fact, transferring assets will not shelter those assets at all, and may be construed as fraudulent activity which comes with criminal repercussions. Selling assets to settle your debts is, of course, a legitimate response to try to mitigate the financial strain. It’s essential to bear in mind that your Statement of Financial Affairs is a lawful document, so you must be honest with your financial history or face the likely consequences of getting caught. You’ll be asked by the trustee if you sold, transferred or gave away any assets, typically 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, 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 need. If you are dealing with financial adversity, it’s common for friends and family to give money to you to alleviate 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 critical to keep work related money and personal money totally separate from each other. All of these activities can create a considerable amount of confusion and can bring about claims of fraud when filing for bankruptcy.
As you can see, there are some serious 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 information or to talk with somebody about your circumstances, contact Bankruptcy Experts Melbourne on 1300 795 575 or visit http://www.bankruptcyexpertsmelbourne.com.au