RESP and Bankruptcy
My spouse and I wish to start RESP’s for our children. I am currently staying home with them and he is the sole provider. I will likely have to file bankruptcy in the near future. If we have already started the RESP’s when I file, will they be affected. If we have not yet started them, will we be able to do so after I declare bankruptcy?
Thanks.
If you file bankruptcy and have an RESP for your children, because the RESP is not held to be a true trust and is cashable by the plan-holder it is an asset that you will loose.
When a trustee cashes in an RESP, there are usually plan administration fees to pay, and all government contributions are returned to the government, so the money that the trustee receives is generally far less than the value of the RESP if it is not collapsed.
If you are in financial difficulty and have an RESP that you want to protect, there are options. In a bankruptcy situation, the RESP can be repurchased from the trustee. If a consumer proposal is filed, the RESP will not be affected. For further information on what to expect, or if you will be able to protect these types of funds you should contact a licensed trustee in your area for details.