Bankruptcy and RRSP.
I have about 20K in my RRSP. If I declare bankruptcy and the trustee liquidates the RRSP will tax be withheld at the standard rates? (ie. the creditors get only about 15K)
If the withheld tax gets refunded in the post bankruptcy tax return due to low income will the trustee get the refund?
Unfortunately, that’s not what is going to happen. When a trustee cashes out an RRSP they are required to file something called an “In bankruptcy” tax return for the RRSP. The trustee will then remit whatever income taxes are required. The net amount of the RRSP after the taxes have been paid will then be distributed to your creditors.
If a trustee cashes out your RRSP then there’s no impact on your personal taxes.