Using RRSP to Pay off Debts
If you have a sizeable debt load and are looking for some ways to have that debt reduced or paid off, you may be wondering if you could use your RRSP to pay off your debt. You may also be thinking, should I really use my RRSP to pay my debt?
Before Cashing in
Before you rush into cashing in your RRSPs, you need to consider all of your options available. You need to see if you are insolvent or not. If you are insolvent, you then may qualify for a government program. Getting the full facts before making this big decision can help you make a better informed decision for you and your family.
Avoiding Bankruptcy
This government program can help you avoid bankruptcy. Avoiding bankruptcy lets you keep your assets such as your home (mortgage payments) and car (auto payments), providing you keep up on the payments for each of these. Your unsecured debts are paid at a reduced rate into a monthly payments that is more controllable. Note, only contributions that have been made to RRSPs/RIFFs 12 months before filing, may be clawed back.
Consumer Proposals
This government program is call a consumer proposal. With a consumer proposal, your unsecured creditors are paid at a reduced amount. A proposal cannot be longer than five years. After this is completed, the individual is then released from the unsecured debt that was covered in the accepted proposal.
The Bankruptcy and Insolvency Act (which governs proposals) is designed to help protect people that are in financial distress, and helps people keep their RRSP and RIFFS. RRSPs/RIFFs 12 months before filing, may be clawed back.
Find Out More
Consider all your options before cashing in your RRSP to pay down your Debts. If you live in the Toronto Area, call us at 416-498-9200 to book a free consultation. During your consultation, we will review your finances in detail and go over all of your options for getting out of debt – in a professional and supportive environment.
