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Timing of Cashing of RRSPs

I am declaring bankruptcy. I am currently on welfare and soon to go on disability. I am told I am allowed to keep for myself up to $500 of a RRSP I have by the welfare people. The rest they would want. I have been told by financial folk if I cash the RRSP before declaring bankruptcy I would likely lose the money invested. Why? I know I will have to pay a withdrawal tax or such to the government but is there some way I would lose that money to the bankruptcy?

Posted from: Prince Edward Island

One Response to “Timing of Cashing of RRSPs”

A licensed trustee said...

It sounds to me like you are getting some “old advice”. The only RRSP money you lose when you file for bankruptcy is money that has been deposited in the last 12 months. If you havent deposited any new money into your RRSPs in the last year then they are protected when/if you file for bankruptcy.

Now, if you want to withdraw the moeny because you need it to survive then you will need to provide BEFORE you file for bankruptcy, you will need to provide your trustee with a detailed list fo what you do/did with the money. If you used it to pay the rent there won’t be a problem – if you used it to buy a new computer there may be a problem.

Speak to a trustee before you make any decisions – it sounds like the financial advisors you have been speaking to are not up to date with the law.