Bankruptcy – Investments

Bankruptcy and Your Investments

How investments are handled in a bankruptcy usually hinges on two things:

  1. Is the investment registered for retirement; and
  2. Did you make voluntary contributions during the last year?

Let’s look at some common types of investments on a case by case basis.

RRSP

Funds in Registered Retirement Savings Plans that were contributed more than one year ago are exempt, and unaffected by bankruptcy.  Voluntary RRSP contributions made in the last 12 months must either be surrendered to your Trustee in Bankruptcy or repurchased.

LIRA and Employer Pension Plans

Both are exempt in Ontario and unaffected by bankruptcy.

TFSA

Tax Free Savings Accounts are not registered for retirement and are therefore not exempt.  This means that any funds you have in a TFSA must be surrendered to your Trustee for the general benefit of creditors.

RESP

Registered Educational Savings Plans are not registered for retirement, and therefore must either be surrendered to your Trustee or repurchased.

Insurance: Whole-Life or Universal Insurance Policies

Where the beneficiary of the policy is the bankrupt’s spouse, child, grandchild, or parent the policy’s cash surrender value is exempt and unaffected by bankruptcy.

Term life policies have no value and are also unaffected.

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