Avoiding Bankruptcy in Ontario by Selling Assets

Question: My ex wife and I are doing everything we can to avoid bankruptcy in Ontario. While are finances are bad we are paying as much as we can. We took back a leased vehicle are we can't afford the payments. We had cashed an RESP in for $8,000 in August 2008. With that money my ex wife bought a used vehicle and used the rest to pay some bills. I am selling a 4 wheeler for $2,000 and using that money to pay down some debt. If our efforts do not work will the fact we sold these assets to avoid bankruptcy cause us issues?

Answer: Possibly. If you decide to file a consumer proposal or bankruptcy you are required to disclose whether or not you disposed of any assets within the past year, and you must disclose what you did with the money. Selling a $2,000 vehicle is probably not a big issue, and using the money to buy another inexpensive vehicle is also probably not a big issue.

However, if you use the money to prefer one creditor over another, it could be a problem, because the other creditors may oppose your discharge from bankruptcy and request the return of the money.

Before you start selling assets and repaying some, but not all, of your debt, it would be wise for you and your ex to meet with a licensed trustee to review all of your options, so that you understand all of the implications of your actions.

Labels: bankruptcy Ontario, consumer proposal