Selling Belongings Before Going Bankrupt
Bankruptcy is always going to change how you think about your personal affairs and specifically your personal finances.
When you do file for bankruptcy, you will need to work with a trustee.
They will be responsible for ensuring that you take the right actions here and that you are being honest about how much you have and how much you can afford to pay back.
Specifically, they will “investigate your affairs.”
The aim here is to make sure that they find as much as possible about your property and your debt.
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The main goal will be on determining what property you own can be sold off to pay your creditors.
In the vast majority of cases, no property will be taken and due to exemptions, most people won’t have to give up any of the property at all.
You might also be expected to provide information on property that you had in your possession just before you filed.
The aim here will be to ensure that if the property was sold off then you can provide accurate accounts of what happened to the money.
Selling Before Bankruptcy
You might be wondering if and how you can sell your property the right way before you file for bankruptcy.
Well, the good news is that there are certainly ways to do this.
So, let’s explore some of the options here.
If you are going to sell before you file, you need to make sure that you maintain a high level of transparency.
Keep in mind that it should not negatively impact the people that you owe money too.
If you think you are completing some shady practices, then you probably are.
Be aware that bankruptcy is a legal process with regulations and rules built-in.
The aim here is to help all parties involved, including you.
What About Liquidating Exempt Assets?
You might be tempted to liquidate assets that are already exempt.
For instance, you might think about liquidating RRSP savings.
These are usually going to be exempt when you are filing for bankruptcy.
However, that doesn’t mean that liquidating them is going to be the right move.
It could be the wrong choice.
Instead, bankruptcy or a consumer proposal could be a better option.
This will be the case if liquidating your RRSP savings isn’t going to clear all the debt that you have accumulated.
How Does It Work?
It’s possible that you have a car for a number of years before you filed.
Let’s say that this car sold for a couple of thousand and this money was then used to pay off an amount that you owed in rent.
This is a reasonable use and would likely be accepted.
However, if you still had possession of the money you earned from the sale, then this would need to be handed over during the investigation.
Alternatively, it’s possible that when you file for bankruptcy you have two cars in your household.
If that’s the case, then it’s likely that one will be exempt.
The other will need to be considered equity.
As such, the value of this vehicle will be used to pay off some of your debts.
Some people try to save their possessions by ‘selling them’ to family members and people that they know.
For instance, you could decide to sell your second vehicle to your brother for just a couple of dollars.
As this isn’t a reasonable price and the vehicle is essentially still in your possession, it could be claimed even if it was sold before you filed.
The reason for this is that it will be obvious that the purpose of the sale was to attempt to keep the vehicle before the bankruptcy was filed.
You need to be careful about exploring loopholes and gaps available to cheat the system.
It is unlikely that these will work in your favor.
Get In Touch
If you are struggling with your rights and the options that are available to you when you are filing for bankruptcy, make sure that you contact us today.
Professionals in debt relief, we have provided our support and assistance to more than 100,000 Canadian citizens and we’re confident that we can help you too.
When you contact us, our aim will be to help you escape debt as quickly as we can.
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