Debt Free in 30 515 – The Pros and Cons of Selling Everything to Pay off Your Debt
Jul 13, 2024
Ted Michalos, co-founder of Hoyes Michalos and a licensed insolvency trustee, shares invaluable insights on managing debt while owning assets. He discusses the complexities of cashing out savings to solve debt problems and highlights the risks of liquidating retirement funds. The conversation covers the protection of various assets during bankruptcy, including homes and education savings, and emphasizes the need for professional guidance to navigate these financial decisions effectively.
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Clients Sell Protected Assets Prematurely
- Many clients sell protected assets before seeking help, often unnecessarily losing possessions.
- Doug and Ted say early advice could have preserved those assets and avoided worse outcomes.
Don't Raid RRSPs To Fix Debt
- Avoid cashing large RRSP withdrawals to pay unsecured debt because withholding tax and your marginal tax rate create big surprises.
- Talk to a licensed insolvency trustee before withdrawing, since taxes and remaining debts often leave you worse off.
RRSPs Largely Exempt From Seizure
- RRSPs and RIFs are protected in bankruptcy unless you contributed to them within the last 12 months.
- Recent law changes now shield retirement plans from seizure, shifting planning implications for debt relief.
