RRSP and Bankruptcy in Ontario

Question: can I redeem an rrsp before going bankrupt in Ontario?

Answer: When you file for bankruptcy in Ontario, you are required to disclose to your bankruptcy trustee all assets you have disposed of or redeemed in the previous twelve months (or up to five years in certain cases). Thus if you cashed in your RRSP today, and went bankrupt tomorrow, you would have to provide your trustee with details of how much you received, and what you did with the money.

If you cashed in a $500 RRSP because you were behind on your rent and were about to be evicted, it probably won't create any issues.

However, if you cashed in a $10,000 RRSP and gambled the money away, your creditors will probably oppose your discharge from bankruptcy and ask the bankruptcy court to extend your bankruptcy until you have paid some or all of the money back.

Since your RRSP is on file with Revenue Canada, there is no point in hiding something like this from the trustee; they will find out directly from Canada Revenue Agency. We suggest you discuss this with your trustee prior to making the decision to file for bankruptcy.

Labels: bankruptcy Ontario, bankruptcy trustee