RESPs and Debt Settlement Options

Tuesday, November 29, 2016 - 23:31

Consumer Proposals, Bankruptcy, Asset Concerns


Many people with children plan ahead for their children’s post-secondary education by investing in a Registered Education Savings Plan (RESP). Most people with RESPs who come into our office are concerned about what will happen with their RESP if they choose to file bankruptcy or make a consumer proposal.

First of all, I’ll explain what an RESP is. An RESP is comprised of three parts:

  1. Contributions you’ve made
  2. Government grant
  3. Growth and investment return

The good news is, if you file bankruptcy, your government grants and growth/investment return are protected by creditors. The bad news is, creditors will have the right to the contributions you’ve made.

Therefore, bankruptcy might not be the best option for you. If you’re in debt, and want to protect your entire RESP, we can help you file a consumer proposal. When you file a consumer proposal you don’t sign over the things that you own to eliminate your unsecured debts, rather you offer to repay a portion of what you owe over time. In other words, you get to keep the entire RESP.

With increasing tuition costs, this is good news for the consumer, especially the consumer struggling with their finances and contemplating debt settlement options. You can breathe a sigh of relief knowing that the contributions made to the RESP plan for, in some cases, over a significant period of time, given the same exemption status as RRSP and pension funds. 

The bottom line is, don’t let the fear of losing your savings and other assets stop you from seeing us. We offer free, no-obligation consultations and review all options with you. No pressure. We just want to help!

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