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 RRSP’s. However, exemption rules are slightly different in every province.
As for the tax issue, if the Trustee cashed in an RRSP, normally an “in-bankruptcy†return will be prepared and the tax owing on these funds will be paid out of the RRSP moneys received by the trustee.