RRSP withholding tax
January 31st, 2007 by Questions
I borrowed a large amount from my friends and relatives to pay the medical expense for the father and the funeral expenses, I\’m a pensioner and have only 400 each month, now I need to withdraw my RRSP savings 50,000 to pay the debts and the credit cards, I got the info from the bank that if I withdraw not more than 5000 each time,it only deduct 10% withholding tax, if withdraw several times, by end of the year need to pay back the difference to the Revenue due to the income will be greater. If I done so in Feb 2007 and choose to declare bankruptcy in May/07, (cause I owe credit cards 90,000 and relatives debts 40,000), when the trustee submit my income tax of 2007, will they include the tax and I no need to pay the the revenue.
I need help and please advice.
One Response to “RRSP withholding tax”
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January 31, 2007 at 7:29 am, A licensed trustee said:
On the surface, your plan sounds reasonable. The problem you may run into is this: if you cash out all of those RRSPs and then file bankruptcy, your trustee is going to require you to provide a detailed accounting of what you did with the money. If you repaid family and friends nd didn’t repay an equal amount to all of your other creditors, your trustee will be required to contact all of the people that you paid and demand the money back. Instead of solving a problem, you will be creating a much bigger one a year from now.
I think you should talk to a local trustee before you execute your plan – I suspect they will have a better idea.
Off the top of my head, I think you ought to conside a proposal to creditors, whereby you cash out the RRSPs, your trustee remits the required tax on your behalf and then the remainder is paid to your creditors on a proportional basis.
I am sure whatever trustee you talk to will have a couple of other alternatives too.