Is it ok to buy exempt items 1 week before filling bankruptcy?
In my province, $4500 of furniture is protected by exemption. Also, RRSP’s are 100% protected by exemption. I recently lost my job and am on EI. The company I worked for had a GRSP that I just cashed out in order to have money while I waited for my first EI payment and to buy some furniture.
I have just started considering bankruptcy this week. I don’t have any furniture in my apartment. Since furniture is an exempt asset, would it be ok for me to buy a $2000 dollar couch, have the brakes done on my car, and put the rest of the money into an RRSP, or would that be seen as trying to keep money from my creditors?
1 Answer
The Trustee will look at your intent in using the proceeds from the GRSP.
You’re using money to purchase necessities of life such as furniture and getting your brakes repaired. It’s doubtful that any party – creditors or Trustee, will take issue with this.
With respect to your remaining proceeds – under the Bankruptcy and Insolvency Act, any contributions made to an RRSP within a 12-month period prior to the date of bankruptcy are clawed back by a Trustee and the proceeds are deposited into the bankruptcy estate trust account for the benefit of your creditors.