|March 29, 2017||0|
Lots of bills? Too much debt? Not nearly enough money? Lots of people struggle financially at some point in their lives. Unexpected situations such as hospitalisation, redundancy, and also divorce, can seriously alter your financial situation. But, when there is no other way to appropriately cope with your debts, some individuals are forced to file for bankruptcy.
Going bankrupt is never easy. It’s complicated, stressful, and emotional. As a result, lots of folks dig themselves a deeper hole before even filing for personal bankruptcy. It is vital that you seek professional advice regarding your bankruptcy options. There are a number of financial decisions that should be avoided at all costs to avoid wreaking havoc on 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 facing financial issues is to stop using your credit cards. Although it is tempting to make smaller purchases like meals and petrol, the reality is that credit cards have extravagant fees which only get magnified when you’re incapable to make repayments. Alongside this, making large purchases with the knowledge that you will shortly be going bankrupt is considered fraud. Obviously, small purchases are okay, but if you deliberately max out your credit cards before 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 reasonable to payoff 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 inevitably postpone 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 done to recover the money that was paid to the favoured creditor to ensure it can be allocated 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 accurate information relating to your assets, income, debts, and expenses. Failing to acknowledge an asset, for instance, is considered misrepresentation and you will be liable to criminal prosecution. If you’re unclear of anything, speak with your lawyer and spend the time to investigate to make sure that you’re supplying the correct information. When it comes to money, there are electronic trails almost everywhere, so don’t think you can conceal anything. You might get away with it initially, 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 fallacy. In reality, transferring assets will not protect those assets at all, and may be deciphered as fraudulent activity which comes with criminal consequences. Selling assets to pay back your debts is, of course, a natural reaction to attempt to ease the financial burden. It’s imperative to remember that your Statement of Financial Affairs is a legal document, so you must be truthful with your financial history or face the possible repercussions 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 before filing for bankruptcy. You’ll also be asked what you did with the money you received from those transfers, so be wary of a preferential transfer, particularly 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’re experiencing financial adversity, it’s common for family and friends 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 totally separate from each other. All of these activities can produce a great deal of confusion and can trigger claims of fraud when filing for bankruptcy.
As you can see, there are some significant consequences for relatively minor financial decisions when you go bankrupt. To ensure you have the best bankruptcy case possible without any legal hiccups, seek professional advice from the experts. For more details or to talk with somebody about your situation, contact Fresh Start Solutions on 1300 818 575 or visit http://freshstartsolutions.com.au