Are Rrsps Exempt In A Bankruptcy

2009-09-02

 The short answer is yes. The longer answer is that a) it depends on the province and b) it depends, somewhat, on how much those RRSPs are worth. In Saskatchewan, RRSPs have been exempt under provincial law for six years now, and there is no provision in respect to contributions made in the past year. The Federal exemption for RRSPs, which is much more recent, does allow the Trustee to reverse contributions made in the year prior to bankruptcy. The net effect of this is that someone who lives in Alberta, for example, may lose some of their RRSP contributions where someone is Saskatchewan might not. The larger issue, and one that I see becoming a bigger issue over the next few years as the population in Canada ages is what I refer to as the “Its too much” argument. This won’t be an issue if someone has a few thousand dollars in RRSPs, but there is a line of cases that say if a bankrupt has a large dollar value of exempt assets, the courts can order a conditional order notwithstanding the exempt nature of those assets. The courts will take into account the fact that RRSPs are “locked in”, or not, but I would suggest that any individual with a large amount of RRSPs might wish to consider a proposal instead of a bankruptcy. As always, please consult one of our insolvency team in the office nearest to you if you think this might be an issue. Ian Schofield MNP Regina 306-790-7904