RRSPs proteced if you file bankruptcy in Canada

In a final act of desperation, many consumers resort to the one last asset they have left but fear losing if they have to file a bankruptcy…their RRSP account.  People end up tapping into their future retirement savings to pay creditors or subsidize their living expenses if no money is left after debt payments. But consumers have told me that one of the main reasons why they felt the need to deplete their accounts is the fear that the bankruptcy Trustee will take their RRSPs and so the thought is, why not clean out the account first before the Trustee does.


Before you dip into your retirement savings, you need to know that bankruptcy has no interest in your RRSPs.  People are surprised to hear that there is protection given under provincial and pension legislation for RRSPs, LIRAs and pensions which prevents the seizure of these funds.  Knowing this vital information ahead of time can prevent the depletion of retirement savings that has, for most people, taken years to build.  I am seeing more and more people who’ve cashed out their RRSPs before filing a bankruptcy which not only resulted in eliminating their retirement plan but created a tax liability to Canada Revenue Agency. Don’t add to your debt load…keep your RRSPs for retirement since that was the intention, and still must be, of banking your hard earned dollars.


Start planning a way to deal with your debt…but plan to keep your RRSPs. 



This post written by Freida Richer

Trustee at Grant Thornton Alger Inc.

Generation X & Y debt levels soar in response to changes in our world—and choices.

Current statistics indicate that Gen X’ers (those born after 1980) and Generation Y are increasingly unable to pay their debt and seeking solutions to deal with their unmanageable debt. Nationally, 21.4 per cent of all Canadian insolvency filings are made by individuals aged 18 to 34; in Alberta that number is even higher at a shocking 23.2 per cent!

A number of factors contribute to the challenges of paying off the debt load of the younger generations including:

  • Poor employment prospects with heavy student loans: New graduates end up carry debt loads that average between $20,000 and $30,000 and take an average of 14 years to pay off – if they ever get paid off. One out of three students enters a low-skilled job or accepts employment in an outside from the area they studied after graduating.
  • Dim summer job prospects: Student jobs in the summer of 2012 were at their lowest level recorded. 14.8 per cent (June 2012) of the youth were unemployed – more than double the national average! In 2013 a Statistics Canada study found that 13 per cent of the 6.8 million Canadians aged 15 to 29 were not currently in school, employment or training. While 2013 reflected an improvement – there is still room to go.
  • Competition for work: Baby boomers who are delaying retirement or returning to work after retirement reduce employment prospects for youth. – Much of the time, the baby boomers only want to work the coveted part time positions which are in high demand by students.

In additional to these realities, some young Canadians are further affected by changes in society leading them to make different choices than the generations before them.

It’s no secret that our world has changed; we are no longer a nation of cautious savers, guided by close-knit families living in the same community. Today we are mobile and we’re linked, informed (and occasionally over-informed) and stimulated via technology in new, immediate and potentially addictive ways. We are keeping up with the Joneses’ the Smiths’ and the Browns’. We have become social voyeurs in the field of social media and technology; we are seeing and sharing instantly our upgrades: the new car, toys and the clothes. Our increased exposure to the online world of social media further debilitates our sense of self-worth, leading some of us to chase the same ‘keeping up with the Jones’ perception like never before.

Our exposure and access to consumer products is further stimulated (in part) by our ‘celebrity’ culture. Unlike the generations before, this generation has increased access and visibility to the celebrity lifestyle, exposure to these celebrities’ personal lives, homes and luxuries. We now have new ‘instant’ celebrities (You Tube) and the development of the ‘reality TV star’ celebrities have made us all share and consume more – excess no longer seems that excessive, it has become the new normal. These all-access passes have led (for some) to: unrealistic buying practices. There is a detached (and sometimes irresponsible) use of ‘plastic’ (credit cards) resulting in a cohort of this generation as having poor financial literacy skills, distant role models and debilitating debt.

What is one to do? A common solution to this increasing debt and the burden it bestows is for Gen X & Gen Y is to simply ask their parents to help them out, leading to significant financial burdens of the sandwich generation: those with kids in the home while also taking care of their parents.

Financial literacy training and non-profit debt counseling services are available in most major centers and on-line. Professional debt services share: insight, guidance and debt resolution solutions with Canadians—from teens to seniors. The most important thing parents can do is start early; teach the importance of financial management while your kids are still young.

If you or someone you know are facing financial struggles and an unmanageable debt load—one of our professionals is available to discuss your situation. There are many options available to help and you may not need to go bankrupt. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll free from anywhere in Alberta 310 8888.

Information provided by: Community Foundations of Canada Vital Signs, Statistics Canada and the Office of the Superintendent of Bankruptcy.