What should my friend do.
`A friend` used cash advances from credit cards to contribute to an rrsp.
His logic was that his income was about to fall dramatically, so better to borrow now to contribute and mitigate taxes owing while his income was high, then withdraw to pay off the credit cards considering that his income tax payable would be much lower due to a lower income.
The problem is that the he invested inn stock and his rrsp is worth about 35% of his debt to the credit card companies.
Because of the current condition of the employment market, this shortfall cannot be made up, even if the rrsps are drained over the next year.
Should my friend continue to protect his credit rating, or protect the rest of his rrsp by declaring bankruptcy?
Posted from: Ontario
It is not possible to answer this question without looking at your debts in greater detail.
While it is always a good plan to protect a credit rating, it must be done while considering the total debts owing and his ability to pay those debts off in a reasonable time frame.
I would suggest your friend contact a local trustee. That way they can look at things in a little more detail and develop a plan to deal with the situation at hand.