Posted on Friday, March 24, 2006Personal Bankruptcy and Registered Education Saving Plans (RESP)Are RESP's lost in a personal bankruptcy? Unless an asset is exempt, you are required to surrender your assets to the trustee when you go bankrupt. Since an RESP is not an exempt asset, RESPs are surrendered in a bankruptcy.What is an RESP? An RESP is a registered savings plan for a child's future education. A plan-holder makes contributions to the plan and the government will match 20% of the contribution, up to certain limits. This asset then grows and when the child withdraws the funds for educational purposes, the child is taxed on the growth. The plan-holder remains in control of the plan and may have it collapsed - net of any government contributions that are subsequently lost. If I go bankrupt, why do I lose the RESP for my children? An RESP is generally held not to be a true trust, and is cashable by the plan-holder. Because the plan holder (usually the parent) can cash out the RESP at any time, the RESP is considered to be an asset of the plan-holder. Therefore, if the plan-holder is bankrupt, the RESP is seized by the Trustee. How are the costs to collapse an RESP handled in a bankruptcy? When a trustee cashes in an RESP, there are usually plan administration fees to pay, and all government contributions are returned to the government, so the money that the trustee receives is generally far less than the value of the RESP if it is not collapsed. If you are in financial difficulty and have an RESP that you want to protect, there are options. In a bankruptcy situation, the RESP can be repurchased from the trustee. If a consumer proposal is filed, the RESP will not be affected. To discuss your situation in detail, please contact us or call us at 310-PLAN. Posted by Scott Schaefer, CA @ 4:21 PM
Posted on Monday, March 13, 2006What are your bankruptcy alternatives?Hoyes Michalos & Associates is not a bankruptcy firm - we are a "fresh start" organization. This means that if you are having money problems, we will help you explore all of your bankruptcy alternatives.Obviously we can help you file a personal bankruptcy, but you may be surprised to learn that we only file a bankruptcy for less than 10% of the people who contact us. If you have more debt than you can handle, we will help you explore all of your options, including helping you consider a number of personal budgeting as a way to deal with your debts on your own. We will help you decide if a debt consolidation loan is a good option for dealing with your debts. We can refer you to a credit counsellor to prepare a debt management plan. And of course we are always happy to explain consumer proposals as an alternative to bankruptcy. No-one solution fits everyone, so please contact us today and let our professionals work out a solution that's right for you. Posted by J. Douglas Hoyes, CA, Trustee @ 8:07 PM
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