What Happens to my RRSPs and Other Investments in Bankruptcy or a Consumer Proposal
Here are the five most common investments and how they are dealt with when filing for personal bankruptcy or filing a consumer proposal:
RRSPs are exempt from seizure with the exception of contributions made by you during the 12 months prior to filing for bankruptcy. These funds get deposited with your Trustee for the benefit of your unsecured creditors. In some cases, even the amount contributed in the last 12 months could be exempt; this needs to be reviewed with the Trustee.
Company pensions or union pension plans are typically locked-in until you retire so they are exempt from seizure in bankruptcy.
RESPs are not considered exempt assets in a bankruptcy. Even though they are intended for your child’s education the parent is considered owner of the policy. You would have the option of either cashing-in the RESP or making payments to your Trustee for the cash value of the RESP.
RRIFs, RRSPs and other investments with an insurance company are exempt from seizure by a Trustee under Provincial legislation.
Canada Savings Bonds are not a locked-in investment so you would be required to cash in the bond and deposit the funds with your Trustee for the benefit of your unsecured creditors. Alternatively, you could pay the balance of the CSB’s to the Trustee over a reasonable period of time.
In a consumer proposal, the non-exempt value of these investments will be considered in structuring the settlement offer to your creditors.
For a free consultation over the phone or in person in Saint John, Moncton, Fredericton or Charlottetown, please contact us. Powell Associates Ltd. is a licensed insolvency trustee focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses.