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October 2013 - Options for solving financial problem Part III – Liquidation of assets

Options for solving financial problem Part III – Liquidation of assets

☳ by Adam Aspilla

So far Debt Consolidation and Mortgage Refinancing (equity take out) were discussed in the last two issues of this paper. The third option is called Liquidation of Assets.

Liquidation of Assets simply means if you have other assets like: GIC, stocks, bonds and other investments convert them into cash to pay your debts.

 

Liquidating your assets would cost you money for you may pay for penalties should your investments are for certain period of time and you would withdraw or liquidate them prior to date of maturity. You may also pay a broker’s fee if you are using a broker to liquidate them.

Before liquidating your assets, you need to calculate the cost to liquidate and compare the cost to the interest you can save on the debts (specially credit cards) you are going to pay off from the proceeds of your liquidated investments.

 

Should the cost of liquidating your assets is lower than the interest you would pay on your outstanding debts, you may consider to liquidate them. On the other hand, if the cost is higher than the interest you could save, you may wish to just continue paying your outstanding debts until they are paid in full.

However, should you have a cash-flow problem, where you have no enough cash to pay your monthly-required payments or you are already in arrears of your outstanding obligation, and legal action is forthcoming or a legal action has already commenced, you may choose to liquidate your assets though the cost is higher than the interest you can save, for litigation is very costly, for you may hire a lawyer to represent you in court.

 

Even if you would not hire a lawyer, when a judgment is rendered against you, you are usually required to pay for the legal cost that include the lawyer’s fee of the lender. Moreover, you still have to pay for the principal amount of your debts plus accumulated interest in arrears.

If you have no other assets and you cannot qualify for Debt Consolidation and Mortgage Refinancing (equity take out) as discussed in previous issues, you can still consider other options like: Debt Settlement (Negotiation), Credit Counseling, Consumer Proposal, and bankruptcy that the writer will discuss in succeeding issues.

 

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.