RRSP and bankruptcy
March 8th, 2006 by Questions
i have a co-worker who filed for bankruptcy in late december 2005. he had RRSP that were employer sponsered. He received a letter a few days ago stating that the RRSP that he had were seized and would not be exempt from his bankruptcy. As well because they were cashed/seized they are now seen as dispossible income and therefore he owes money on those RRSP. His problem is that it was over $ 30000 in RRSP and lost everything including his home and is unable to pay the amount owed for cashing these RRSP’s. My question is i was under the impression that employer sponsored RRSP are exempt from seizure if you file for bankruptcy, are they aloud to seized his RRSP’s
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March 09, 2006 at 10:17 am, Barton Goth, GCO Inc. Bankruptcy Trustees said:
In most cases, unless you have a RRSP which is written through an insurance company, or is locked in as a pension rollover, it would be turned over to the trustee in a bankruptcy. Unfortunately there is no special provision for employer sponsored RRSPâ€™s. However, exemption rules are slightly different in every province.
As for the tax issue, if the Trustee cashed in an RRSP, normally an â€œin-bankruptcyâ€ return will be prepared and the tax owing on these funds will be paid out of the RRSP moneys received by the trustee.