With the February 29th RRSP deadline looming, people who are struggling with debt may be curious about how their RRSP contributions may be affected if they were to file bankruptcy.
Certain RRSP and RRIF holdings are protected from creditors under a provision of the Bankruptcy and Insolvency Act.
RRSP and registered retirement income fund (RRIF) proceeds held under any life insurance contract are exempt from seizure if the beneficiary is your grandparent, parent, spouse, child or grandchild.
A trustee can also claw back, or seize, RRSP or RRIF proceeds contributed within 12 months of the date of bankruptcy. If you have made contributions to an RRSP in the previous 12 months that are now at risk of seizure, you must either:
request that your bankruptcy trustee arrange for these contributions to be withdrawn. The trustee will be responsible for paying any taxes owing as a result of that withdrawal prior to distribution to creditors; or
pay the trustee the equivalent of the expected realizations and leave your RRSP intact. This amount can be paid in installments over the term of your bankruptcy.
If you’re concerned about losing your RRSPs if you file bankruptcy, contact us to set up a free, no-obligation consultation. We can discuss every option with you and decide which option best suits your situation.