You’ve exhausted all of your options and have made the decision to apply for bankruptcy as the solution to unpayable or unmanageable debts. It’s a big decision to make, and you will have a lot to unpack with your Trustee as you work through the process. But, before you apply, there are things you should know not to do to ensure that your application is approved, you aren’t creating future issues and that you don’t end up in any unnecessary legal hot water.
Before you apply for bankruptcy, ensure that you do not…
Attempt to temporarily offload your assets to friends and family
While it’s not a criminal act to sell off assets to help pay debts, it is an ill-advised move if you know that you will be imminently filing for bankruptcy. Selling or gifting your assets right before you file an application can look like dishonest intention to defeat your creditors. You are risking the transaction being overturned during the course of your bankruptcy and even having your bankruptcy extended in certain circumstances as well as possible criminal charges by not disclosing this activity to your Trustee.
Dip into your Super
It can be difficult to know that your Super is sitting right there while you struggle to reconcile your debts and you may in fact be tempted to withdraw some super to payoff debts. Prior to doing so you should seek advice as your Super is protected during bankruptcy, so for the financial health of your future self, it is vital that you do not drain it prematurely.
Try to hide or transfer assets
Similar to gifting or selling your assets to friends and family, hiding or transferring your assets for less than market value is considered a dishonest act and may result in criminal charges against you should you subsequently become bankrupt. It can be tempting when the reality of bankruptcy starts to set in, but remember that you’re doing this to get yourself out of financial strain, not create more issues. Be transparent and upfront with all of your assets to your Trustee, and use bankruptcy as the opportunity to clear debts and the stress it brings.
Add to your debts
Although in some circumstances it can be a good idea to create a new debt in order to consolidate your accumulative debts, it's not advised when filing for bankruptcy. Despite what you’re doing with that credit, you are still creating more debt while knowing you cannot afford to repay your existing debt.
Avoid professional advice
Don’t get through bankruptcy alone. Applying can be a daunting experience, and you don’t want to accidentally do, or not do, something that will affect your application or cause you financial or legal issues later on. By consulting a professional in bankruptcy law, you will ensure you are covering all your bases and getting on with life, quicker.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.