RESPs and Bankruptcy

stevewelker 21.01.2026
bankruptcy debt education plan registered RESP savings

Registered Education Savings Plans (RESPs) and Bankruptcy

If you’re considering bankruptcy and have a Registered Education Savings Plan (RESP) for your child, one of the most common questions is:

“Will I lose my child’s education savings if I go bankrupt?”

Unfortunately, the answer isn’t a simple yes or no, as it depends on which part of the RESP we’re talking about. Here’s how RESPs are generally treated in a Canadian bankruptcy.

Understanding the Parts of an RESP

An RESP is made up of different components, and they are not all treated the same in bankruptcy.  RESPs are my contain:

  1. Your contributions
    This is the money you personally put into the RESP.

  2. Government grants and bonds
    Such as the Canada Education Savings Grant (CESG) or Canada Learning Bond (CLB).

  3. Investment growth (earnings)
    Interest, dividends, and investment gains earned inside the plan.

What the Trustee Can Access

1. Contributions (sometimes)

Your contributions are the only part of an RESP that may be available to your Licensed Insolvency Trustee.

  • If contributions are refundable to you, the Trustee may claim them for the benefit of creditors.

  • In many cases, contributions have already been withdrawn, locked in, or otherwise unavailable — in which case there may be nothing for the Trustee to take.

What the Trustee Cannot Take

2. Government grants and bonds

Government incentives in an RESP are not yours personally. They exist solely to support the beneficiary’s education.

  • These amounts are not available to creditors

  • They are either paid to the student through education payments or returned to the government if conditions aren’t met

3. Investment growth (in most situations)

Investment growth in an RESP is usually not available to the Trustee, because:

  • While a child is studying or eligible to study, growth can only be paid out as an Educational Assistance Payment (EAP)

  • EAPs are paid to or for the benefit of the student, not the parent

  • The law does not allow this money to be redirected to creditors

What If My Child Is in College or University?

This is the clearest scenario.

If your child is:

  • Enrolled in a qualifying post-secondary program, and

  • Eligible to receive EAPs

Then:

  • Government Grants and Bonds and Investment Growth RESP can continue to be used for education

  • The Trustee will typically authorize EAPs to proceed

  • Contributions remain subject to seizure by the Trustee

What About Taking the Growth for Myself?

There is only one way a parent can receive RESP growth personally, and that is through something called an Accumulated Income Payment (AIP).

However, AIPs are strictly limited by tax law. In general:

  • The beneficiary must be at least 21

  • The beneficiary must not be eligible to receive EAPs

  • The RESP must meet age and other conditions

  • Heavy taxes apply (regular tax plus an additional penalty tax)

If your child is currently studying, AIPs are not allowed — which means neither you nor the Trustee can access the growth.

If an RESP qualifies for an Accumulated Income Payment (AIP), the Trustee may be entitled to claim the AIP for the estate. Any income tax arising from the AIP will be reported on the in-bankruptcy tax return filed by the Trustee, and any resulting tax will be paid by the Trustee from the estate.

Do Your Research, Before Filing

Not all RESP balances are treated the same in a bankruptcy. Before filing, it is important to understand the makeup of your RESP — including your contributions, investment growth, and any government grants or bonds. Knowing these balances in advance will allow your Trustee to clearly explain how your RESP would be treated in a potential bankruptcy.

Final Thought

If you’re worried about how bankruptcy might affect your RESP, talk to a Licensed Insolvency Trustee early. A Trustee will:

  • Review the structure of the RESP

  • Protect education funds where the law allows

  • Ensure your child can continue their studies without interruption

At Steve Welker and Company Inc., we pride ourselves on our prompt replies and customer service.  Reach us at (416) 246-7771 or debtrelief@stevewelker.ca and we’ll be pleased to review your unique situation and explain your options.