What Happens To My Savings In A Bankruptcy

2016-08-29   minute read

Michelle Scheller


If your financial situation has become overwhelming and you find yourself struggling from one debt payment to the next – you’re certainly not alone. In a struggling economy, with a weakened loonie, unemployment on the rise and a constantly increasing cost of living, thousands of Canadians are beginning to buckle under the weight of trying to keep up with financial obligations.


For this reason, many people are starting to consider their options. Bankruptcy may be a viable debt solution, depending on your financial situation. Many people have hesitations surrounding bankruptcy. They fear they could lose everything if they were to declare bankruptcy. Luckily, this is not the case, as there certain types of savings or investments which are protected. Savings can be in many different forms such as:

  • Pensions;
  • Mutual funds, registered and non-registered plans;
  • Tax free savings;
  • Registered Retirement Savings Plans (RRSPs);
  • Locked in Retirement Accounts (LIRAs); and
  • Registered Education Savings Plans (RESPs).

Generally speaking, pensions, LIRAs and RRSPs are exempt in all Provinces and cannot be seized by a creditor or Licensed Insolvency Trustee, in the event of a bankruptcy. In some provinces however, contributions made in an RRSP in the twelve months prior to filing would be subject to recovery by a Licensed Insolvency Trustee in a bankruptcy.

Savings that are not exempt or protected in a bankruptcy scenario are Tax Free Savings Accounts (TFSAs), non-registered plans and in most provinces, RESPs. The asset will have to be redeemed by the Trustee for the benefit of the creditors. The details surrounding what is and is not protected during a bankruptcy, is certainly a discussion you would have with your Licensed Insolvency Trustee given the different regulations on a province to province basis.

At MNP, when an individual meets with a Licensed Insolvency Trustee for a free initial consultation, information relating to the assets would be reviewed. It is important to understand what a bankruptcy would look like specific to their unique circumstances. If an individual is in a position where they have non-exempt assets, they may want to consider filing for a Consumer Proposal with their creditors instead of a bankruptcy. The options available are dependent on each individual’s specific circumstances.

If you are unsure of what route you would like to take and want to explore your options further, remember there are provincial exemptions in relation to some savings and it is important to understand your rights versus the creditor rights regarding your investments. Contact your local Licensed Insolvency Trustee for a free, no-obligation consultation. Not only will they be fully aware of the rules and regulations specific to your province, they will be able to explain all options available to you so you can make a fully informed decision as you work to achieve a fresh financial start.

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