Too many bills? Too much debt? Not enough money? Most people struggle financially at some point in their lives. Uncontrolled incidents such as hospitalisation, redundancy, or even divorce, can drastically alter your financial condition. But, when there is no other way to effectively cope with your debts, some people are forced to file for bankruptcy.

Going bankrupt is never easy. It’s complicated, traumatic, and emotional. As a result, lots of people dig themselves a deeper hole before even filing for personal bankruptcy. It is imperative that you seek professional advice relating to 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 very first thing you should do when you are facing financial dilemmas is to cease using your credit cards. While it is tempting to make smaller purchases like meals and fuel, the reality is that credit cards have outrageous fees which only get magnified when you are incapable to make repayments. Along with this, making substantial purchases with the knowledge that you will soon be going bankrupt is deemed fraud. Obviously, small purchases are fine, but if you purposely max out your credit cards before filing for bankruptcy, creditors will investigate and you will wind up in a significantly worse position.

Repay Favoured Creditors

When you have uncontrolled debt, do not repay any creditors before you file for bankruptcy. While it may sound practical to settle as much debt as possible, the reality is that it can land you in a great deal of trouble! If one creditor is treated favourably over another, it is called ‘preferential transfer’ and will attract lawsuits which will inevitably postpone 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 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 that it can be spread equally between all creditors.

Lie or Withhold 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 acknowledge an asset, for example, is considered misrepresentation and you will be liable to criminal prosecution. If you’re unclear of anything, speak to your lawyer and spend the time to investigate to make certain you are giving the correct information. When it concerns money, there are electronic 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 relative’s name to save those assets from bankruptcy is a misconception. In reality, transferring assets will not protect those assets in any way, and may be taken as fraudulent activity which comes with criminal repercussions. Selling assets to repay your debts is, needless to say, a common response to try to alleviate the financial burden. It’s crucial to bear in mind that your Statement of Financial Affairs is a lawful document, so you must be truthful with your financial history or deal with the probable consequences of getting caught. You will 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 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 assist in times of distress. If you’re experiencing financial problems, it’s common for friends and family 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 specifically income related such as work or dividends. It’s also important to keep work related money and personal money completely separate from each other. All of these activities can create a great deal of confusion and can lead to claims of fraud when filing for bankruptcy.

As you can see, there are some serious consequences for relatively insignificant financial decisions when you go bankrupt. To guarantee 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 situation, contact Bankruptcy Experts Newcastle on 1300 795 575 or visit