You have worked hard your whole life. Even while raising and supporting a family you’ve made it a priority to save a little bit of money each pay to put into your RRSP for years down the road when it is time for you to retire.
Now, due to some unfortunate reason you find yourself struggling to pay your bills, and you are considering filing bankruptcy in Ontario. Your credit card balances only seem to go higher despite the monthly payments you are making. Your interest rates have jumped because you made a payment a few days late. You have tried calling your creditors to ask for help but they are not willing to work with you. It is time to seek help.
One of the reasons you have not sought help already is because you are afraid of what will happen to you. You have heard stories from your friends; you do not want to lose everything you have worked for.
You might be surprised to find out that if you need to file for bankruptcy in Ontario, there is a good chance that you will be able to keep your RRSP. For more information on other exempt assets in a bankruptcy in Ontario, please see our article on what you get to keep if you file bankruptcy in Ontario.
Will you be able to keep your RRSP if you go bankrupt? When you meet with a Hoyes Michalos professional for your no-charge initial consultation, we will ask you two questions:
The first question is “how much have you contributed into your RRSP in the past 12 months?” The second question is “where your RRSP is held?”
If your RRSP is held with a life insurance company, then depending on who the beneficiary is, the entire RRSP may be exempt from seizure by your trustee. If your RRSP is not exempt due to this, then your trustee is entitled to seize only the amount contributed into the RRSP in the 12 months before you filed for bankruptcy.
This same rule applies to RRSPs that are held at banks or any other institution. Your trustee can only take the amount that has been contributed within 12 months of filing for bankruptcy.
This is good news for you if you have an RRSP that you started many years ago but have been unable to contribute to for the past few years due to your financial situation.
If you do not want to file for bankruptcy, there are other options which can also help you to deal with your creditors. A proposal to creditors is a great way to settle your debts. In a consumer proposal you can offer your creditors a low monthly payment over a period of up to five years. You avoid bankruptcy, and you get to keep all of your assets, including your RRSP.
Whether you file a bankruptcy or a consumer proposal, once you have your debts under control you will be able to continue contributing to your RRSP and saving for your future.