What Happens to my RRSP if I File for Personal Bankruptcy?

Most people have heard that filing for bankruptcy could mean that they aren’t able to keep all of their assets.  I want to focus today on one specific question:  What happens to my RRSP if I file for bankruptcy?

For most people, the answer is that nothing happens.  The bottom line is that most people are able to keep most or all of their RRSP when they file for bankruptcy. The worst case scenario is that you would lose what you’ve contributed to your RRSP in the last 12 months before filing for bankruptcy.  That’s what the Bankruptcy and Insolvency Act says.  For most people, that number is very small (or zero).  If you’ve been having trouble making your debt payments, there simply wasn’t anything left over for the RRSP. Even if there have been recent contributions, for many people the answer is still that they don’t lose anything.  If your RRSP is invested at a life insurance company (and most are), your plan is fully 100% absolutely protected as long as your spouse, child, parent or grandparent is the named beneficiary on the account.  That’s what the Ontario Insurance Act says.

What about a consumer proposal? That’s an even more straightforward answer.  With a consumer proposal you offer a reasonable monthly amount to repay a portion of your debts and get to keep all of your assets and property.

Filing a personal bankruptcy or consumer proposal is not something to take lightly.  They are options to consider when there is no reasonable expectation of being able to pay your debts in full.  Furthermore, I don’t expect everybody to remember all the technical tidbits that I throw out there.

If you’d like to talk about these options, or how your RRSP or other assets will be affected, contact us today for a free consultation.