What Happens to my Investments in Bankruptcy
Here are the five most common investments and how they are dealt with when filing for personal bankruptcy:
Registered Retirement Savings Plan (“RRSP”)
Your RRSP is exempt from seizure except for your contributions in the 12 months before filing personal bankruptcy or a consumer proposal.
Typically your Trustee does not collapse your RRSP account. They will require you to pay, the value of your contributions in the 12 months before your bankruptcy, into your bankruptcy estate because this portion of your RRSP is not exempt, and your Trustee must collect it.
In some cases, even the amount contributed in the last 12 months might be exempt; the Trustee will determine this based on Federal and Provincial legislation.
Company pensions or union pension plans are typically locked-in until you retire, so they are exempt from seizure in bankruptcy or are exempt from seizure by creditors by federal or provincial legislation.
Registered Education Savings Plan (“RESP”)
The RESP account you have set up for your child’s post-secondary education is not considered an exempt asset in bankruptcy. The parent is the policy owner, even though they are intended for your child’s education. You would have the option of either cashing in the RESP or making payments to your Trustee for the RESP cash value.
Most investment products held at a Life Insurance Company are exempt from seizure by creditors, by provincial legislation, including; Registered Retirement Income Fund, Registered Retirement Savings Plan.
Canada Savings Bonds and Tax Free Savings Acts
These investments are not locked-in or protected from creditors. Your Trustee will require you to cash in these investments or make payments to your bankruptcy for the value of these investments.
Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;
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Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.
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