Determining Whether Or Not Rrsps Are Liquidated Assets When Filing For Bankruptcy In Alberta

2011-12-14   minute read

There are 2 ways that an asset can be exempt from a bankruptcy proceeding:Under Federal legislation (the Bankruptcy and Insolvency Act) and;under Provincial Legislation (in Alberta, this is the Civil Enforcement Act); Watch the video or read below for more information As of July 7, 2008, the Bankruptcy and Insolvency Act says that RRSPs (and RRIFs) are exempt from a bankruptcy except for property contributed within the 12 months before the date of bankruptcy. However, as of October 1, 2009 in Alberta, all RRSPs (and RRIFs, Deferred Profit Sharing Plans and Registered Disability Savings Plans) are totally exempt. One issue that the Trustee would review would be if larger amounts of money were put into the RRSP from other sources in the year of so prior to bankruptcy. i.e. If a person took funds from an asset that is non-exempt and protected it inside an RRSP in the weeks/month before bankruptcy, it may be something that the Trustee or the Courts would review. Another issue that may be reviewed is if the exempt RRSP was purchased with a loan that is now being written off in a bankruptcy. RRSPs can not be held as security for a loan, like a car could. So if it was purchased on credit, this credit will be written off in the bankruptcy. However, the Trustee may review:How much is the RRSP that’s being claimed exempt?How much was the original loan borrowed and how long ago was it borrowed?How much is the current balance owing on the loan? Exploring your options Because RRSPs are now exempt in Alberta, one option that a person may choose to consider is using the RRSP to fund aProposal. A Proposal is an option where a person can offer their creditors a settlement or x% on the dollar. And this could be funded from an RRSP that the creditors will not otherwise be able to touch in a bankruptcy. For more information on what assets you get to keep when filing for a Bankruptcy in Alberta, pleasecontact me directly or consult ourBankruptcy FAQ.

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