Something I keep coming across when I’m helping people file a consumer proposal or bankruptcy, concerns assets – what is included as an asset, and what is often not even thought of?
If you asked yourself, “What assets do I own?†you would probably list things like your car, house, furniture, and clothing. But what about assets that appear on paper only, like pension plans, registered education savings plans (RESPs), life insurance, deferred profit sharing plans, and company stock plans? All of those are considered assets too.
When you file for bankruptcy or do a proposal, you are required to list all of your assets. Typically it’s easy to remember the assets that you physically use and see every day. It’s the assets that you don’t use or think about all the time that often get forgotten.
The important thing to ask yourself about these paper assets is whether or not they have a cash surrender value, meaning can they be turned into cash that you could have now?
In many cases, pension plans are locked in, meaning you have no access to the money until you are 65 or retire from the company. If you leave the company before that, you transfer your pension to another institution, but it is still locked in. In this instance, there is no cash surrender value. If a portion of the plan is not locked in or has not vested then this portion of the plan may have a cash surrender value. It is best to speak to someone in your human resource department to verify the status of any pension plan.
When dealing with RESPs, you might assume that these aren’t your assets, but rather those of your children. Keep in mind, though, that until your child actually goes to school, a RESP is in your name. Before you start to worry, though, there is typically not a lot of cash surrender value in the plan – it usually depends on the age of the plan. Check with your bank or institution.
Life insurance is another asset to consider when filing for bankruptcy. Normally, term insurance doesn’t have any cash value, but some plans do have a cash surrender value as they earn a dividend. Again you need to review your policy paperwork.
And finally, other assets you need to think about are any deferred profit sharing or stock plans offered through work. These assets are easy to overlook because contributions are either made by you or on your behalf by the company, by taking it right off your pay. You need to remember that these have a cash surrender value that is considered an asset in bankruptcy procedures.
If you are thinking about filing for bankruptcy or completing a consumer proposal and are uncertain about your paper assets and their cash value, call me at 310-PLAN. We’ll sit down and figure out the best solution for your financial trouble and give you a fresh start.
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