Free Consultation

LOC, Overdraft, Secured LOC

If a person has $40K in a locked-in RRSP and makes a consumer proposal, can they then access a secured LOC using the $40 K from the locked-in RRSP to secure the LOC? Can they get overdraft protection on their checking account? Cab they get a personal LOC? Is there a mechanism whereby they can sell the $40K RRSP to gain some capital into a savings account, in lieu of a LOC?

Posted from: Ontario

One Response to “LOC, Overdraft, Secured LOC”

A licensed trustee said...

I think you may be missing the point of filing a consumer proposal. The goal is to allow you to deal with your debts in a more reasonable manner, as an alternative to bankruptcy. While there is no prohibition against anyone granting you new credit after you file, the reality is that you are unlikely to be approved for any type of unsecured debt until aftre the proposal has been completed.

Secured debt is possible, but by law RRSPs canot be used as collateral for any type of loan. You will need to find something else to use as collateral and even then, a co-signer may be required to obtain a reasonable interest rate.

All of Canada’s insolvency laws were put in place to allow people to obtain releif from their debts – they have not been designed to allow you to immediately get back into debt…. sort of defeats the purpose, don’t you think?