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cashing in RRSPs

if I have $12000 in RRSP`s and owe to GST Taxes of $18500 and $11,500 to Student Loans. Can I cash the RRSP and pay off the student loan and then file for bankrupcty if the GST – Collections in CCRA will not agree to slow payment. Can I get in trouble by cashing in and payment the Student Loan instant of TAXES in BC.

Posted from: British Columbia

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One Response to “cashing in RRSPs”

Barton Goth – Goth & Company Inc. -Trustee in Bankruptcy said...

If you cashed in your RRSP prior to bankruptcy and selectively paid off one creditor you will have committed what is referred to as a fraudulent preference. You actions would have treated on of your creditors in an manner that is unfair or to the detriment of your other creditors. This will cause a number of issues. The first is with respect to the funds, your trustee will likely have to either demand the money back from the creditor in question (student loans) or you will be required to pay it back. Then the money would have to be distributed among all your creditors as directed by the Bankruptcy and Insolvency Act (BIA). Additionally you will not be eligible for an automatic discharge as you will have committed what is referred to as an offense under the BIA and a discharge will be much harder to come by. As you can see I would strongly suggest you do not do anything of this nature as overall it would have a significantly negative impact.