RRSP and Bankruptcy Laws In Canada

Posted in Personal Bankruptcy
Posted by J. Douglas Hoyes, CA, CPA, LIT, CIRP, CBV


Do I Lose My RRSP After Filing Bankruptcy?

In most cases you can keep your RRSP after filing bankruptcy.

The only part of your RRSP that your trustee is permitted to seize are any contributions made to your RRSP in the twelve months before the date of bankruptcy.

How do we advise a potential bankrupt with an RRSP?

Our first step is to review your RRSP documents to determine how much you have contributed in the last 12 months. If you contribute through your paycheque at work we can generally get this information from your paystub. If you have an RRSP through a bank or investment advisor, they will provide a statement.

If you have made no contributions in the last twelve months, no further action is required; you can keep your RRSP.

If you made contributions in the last 12 months, you have the following options:

  • First, you may request that the trustee contact the bank or investment company and withdraw the contributions from the prior twelve months. It is the trustee’s responsibility to pay the tax owing on that withdrawal, so you have no further costs or obligations.
  • Second, you may decide to contribute an extra amount to your bankruptcy to “buy back” your RRSP contributions for the last twelve months. For example, if you have contributed $1,000 and you are in a 30% tax bracket, the trustee would recover a net amount of $700, so you could pay the trustee and extra $700 and keep the full amount of your RRSP.
  • Third, if you have significant RRSP contributions, you could decide to file a consumer proposal. In a consumer proposal you don’t lose your RRSP.

As a final planning point, if you are not worried about having your wages garnisheed, you could stop contributing to your RRSP now, and wait a few months to file bankruptcy, so that the contributions in the last twelve months are reduced.

If you have any questions regarding your RRSP in bankruptcy, please call one of our Ontario bankruptcy offices or contact a bankruptcy trustee by email today.

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