How NOT to resolve financial hardship

September 2, 2011 by
Filed under: Debt Management 

Here are six ways that you generally should not consider as a means to resolving your debt issues.

  1. Cash in your RRSPs. Any contributions to your RRSPs made one year prior to filing for bankruptcy are NOT considered assets. As soon as you cash in your RRSPs, you have to pay taxes on them. This in turn contributes to your existing debt.
  2. Refinance your mortgage. If your debts are unsecured, they are not tied to your mortgage. Having said that, when you do file for bankruptcy you will be asked to list your assets. If you have money in your house, you may be asked to sell your house. Don’t seek this option unadvised. Seek out the professional advice of at least two (if not three) trustees.
  3. Consolidate with a bank loan. If you are already experiencing financial difficulties, chances are that any loan you can get will have high interest rates attached to it (you will be considered higher risk).
  4. Juggle credit cards. Borrowing from Peter (eg MBNA MC) to pay Paul (TD MC) might placate the creditors this month, but all it does is delay — not resolve — your problem.
  5. Borrow from family. This is just a bad bad bad idea. Money with banks and governments are temporal. They invent it and print it at their leisure. Money from family is a result of hard sweat and labour. You can walk away from debts to institutions and bounce back. It’s called bankruptcy. You cannot walk away from debts to family. It’s forever. And it’s called dis-inherited. Sadly, I’m speaking from experience here.
  6. Ignore the problem. There is a solution for you. You just need to do a bit of work, consult a few experts, and then take action. Then your problems will go away. If you ignore them, they will stick to you forever.
As with anything on this website, there is nothing that is absolute (except for item #6!). Generally, these five points are to be avoided. You as an individual need to take in this information and swill it around in your head. Seek advice from a minimum of two Trustees. Speak to consultants and experts. And then decide for yourself.

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