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RRSP loan and tax impication after I file for bankruptcy

While I was working, for the 2005 taxation year I took a loan in the amount of $ 23000 for my RRSP. I “invested” it in the stock market and today it is worth about $18000.

I am paying close to $200 a month on that loan and I am very tight trying to make that payment along with other credit card payments.

My questions are:

1. If I file for bankruptcy, can that loan be included?

2. Will the bank sell those securities to get some money back and at the same time will it be assumed as income for that year’s income tax?

3. Can I include that money that I will owe CCRA in the future in my bankruptcy file now?

Thanks

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One Response to “RRSP loan and tax impication after I file for bankruptcy”

Barton Goth, GCO Inc. Bankruptcy Trustees said...

By filing either a consumer proposal or a bankruptcy in Canada your RRSP loans will be cleared.

Procedurally, the investments will be liquidated, the monies will be paid into the bankruptcy estate (i.e. which will be administered by a licensed trustee and the balance of the loan will be cleared.

The proceeds from the investment will be used to cover some of the administration expenses of the consumer proposal or a bankruptcy and the balance will be distributed equally among your unsecured creditors.

As for the anticipated tax, the taxes will be paid by the bankruptcy estate, your trustee will file what is called an â€˜In-Bankruptcy Returnâ€ which will calculate the amount owing from the RRSP’s that have been liquidated and any outstanding amount will come out of those liquidated investments.