How Will Bankruptcy Affect My Retirement Income And Investments?

Understanding the Impact of Bankruptcy on Retirement Savings and Revenue

As the golden years of retirement beckon, it is not uncommon for individuals to be saddled with significant debt. This often leads to the contemplation of bankruptcy as a way out. However, the thought that follows is usually: How Will Bankruptcy Affect My Retirement Income And Investments?

Public Pension: The Untouched Income

Retirement income is often sourced from government programs like the Canada Pension Plan (CPP) or Old Age Security (OAS). Filing bankruptcy does not affect this income source, and there could even be a silver lining.

If you owe Canada Revenue Agency (CRA) for unpaid personal income tax and you are entitled to CPP, only CRA is empowered to withhold your CPP income to recover the amount. However, bankruptcy filing can stop this garnishment, and you can receive the full CPP amount rightfully due to you.

It’s important to note that the income from CPP and OAS will be considered in determining if you have surplus income during your bankruptcy.


Safehold Assets: The Retirement Shields

Among the most common retirement safehold assets are Registered Retirement Savings Plans (RRSP), registered company pension plans (RPP), and a Locked-In Retirement Account (LIRA) or Lock-In Retirement Savings Plan.


RRSP: The assets in an RRSP are safe from a bankruptcy Trustee’s reach and your income flow from these investments remains unaffected.

RPP: Similarly, registered company pension plans (RPP) also remain untouched.

LIRA: The same applies to a LIRA, also known as a Lock-In Retirement Savings Plan.


While these assets are exempt, the income stream from these sources will be factored into the surplus income calculation.

Vulnerable Assets: The Retirement Traps

Retirement income also comes from non-exempt assets. These include Tax Free Savings Accounts, rental income properties, mutual funds, and marketable securities.


If these assets are unsecured, they are subject to seizure by the trustee during bankruptcy for the benefit of creditors, resulting in a loss of income stream from these assets.

In contrast, if these assets are subject to a registered security agreement, they are protected from seizure.

Making the Tough Decision

If you are retired and burdened with a considerable debt load, it’s crucial to explore all options before deciding on bankruptcy. Consult with a Licensed Trustee to discuss the best course of action tailored to your unique situation.

Remember, every situation is different, and what works for one may not work for another. It’s important to fully understand the potential impacts of bankruptcy on your retirement income and investments.

Bankruptcy is not the end, but rather a new beginning. It is a legal process designed to provide relief to those who are unable to pay their debts. However, it’s critical to make informed decisions to protect your retirement nest egg.



Retirement should be a time of financial security and peace. Understanding How Will Bankruptcy Affect My Retirement Income And Investments is essential for making informed decisions to safeguard your golden years. Remember, there are professionals available to guide you through these difficult times and ensure your financial future remains secure.

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