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Severance Pay

I have the option of receiving my severance pay and putting it into an RRSP without taxes being taken off …. my question is, if I do this then will my trustee know about it and if he does what are the repercussions, ie, since it is being put into RRSPs do I have to declare this as income? Come time to be discharged how does the trustee/court know if a person has an RRSP, etc.?

Posted from: Ontario

One Response to “Severance Pay”

A licensed trustee said...

You may have the option of placing the severance in an RRSP, but your trustee will treat it as income subject to the surplus income rules. So if you have all of the funds deposited into an RRSP be prepared to make the penalty payments…. your bankruptcy will be extended until you do.

If you are thinking that you may somehow hide this transaction keep this in mind: if you are caught the Court may decide to seize all of the funds and/or refuse to grant your discharge from bankruptcy. I’d give this a lot of thought before I attempt it as the “downside” is fairly severe…