If I Go Bankrupt Will I Lose My Pension in Canada?

Bankruptcy and Pension in Canada: A Comprehensive Guide

Financial difficulties can strike anyone, at any age, and those nearing retirement are no exception. A prevalent fear among many potential bankruptcy filers in Canada is, “If I go bankrupt, will I lose my pension in Canada?” This article explores the relationship between bankruptcy and pension, shedding light on various aspects of this topic.

Understanding Bankruptcy

Bankruptcy is a legal process that provides relief to individuals who are unable to pay their debts. When a person declares bankruptcy, their assets are evaluated and, if necessary, liquidated to pay off the creditors. However, certain assets, including some types of pensions, are often protected from seizure in a bankruptcy.

Pension & Bankruptcy in Canada: An Overview

In Canada, many seniors rely on government funds provided through Canada’s Old Age Security (OAS) and Canada Pension Plan (CPP) as their primary source of income. Let’s delve deeper into these programs.

Old Age Security (OAS)

The Old Age Security (OAS) pension program offers monthly payments to individuals aged 65 or older. The maximum payout as of December 2020 was $614.14 per month, but the exact amount depends on the length of residency in Canada after turning 18.

Guaranteed Income Supplement

The Guaranteed Income Supplement (GIS) is available for individuals who fulfill specific criteria, including being 65 or older, living in Canada, receiving OAS, and having an income below certain thresholds.

Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a government-provided monthly tax benefit to which individuals contribute throughout their careers. This benefit aims to replace a portion of your earnings upon retirement.

Debts After Retirement: A Common Problem

With retirement comes a cut in income, which necessitates a reduction in expenses. If a retiree already has debt before entering retirement, additional debts can pose a significant problem. However, both Federal and Provincial laws protect pensions during bankruptcy.

Why are Pension Funds Part of Bankruptcy?

In certain circumstances, a portion of a pension can be obtained in a lump sum payment. In non-bankruptcy situations, this could allow creditors to seek court permission to seize some or all of your pension payouts. However, bankruptcy prevents creditors from taking these funds.

The Impact of Bankruptcy on Your Pension

According to Statistics Canada, 4.2 million workers in Canada have defined benefit pension plans. How does bankruptcy affect these plans?

Can Creditors Garnish a Pension in Canada?

In Canada, only the Canada Revenue Agency (CRA) can garnish your CPP if you have outstanding income tax or other debts collectable by CRA. However, bankruptcy will stop any garnishment of your pension income.

Can CPP be Garnished?

The CRA can garnish both CPP and OAS and all types of pensions. However, other creditors cannot directly seize your CPP earnings.

The Bankruptcy and Insolvency Act (BIA)

Section 67 (1) (b.3) of the Bankruptcy and Insolvency Act exempts any RRSPs or RRIFs from seizure in a bankruptcy, except for contributions made within the last 12 months.

Exempt Pension in Bankruptcy

Several types of pensions are exempt from seizure in a bankruptcy, including Registered Retirement Savings Plans (RRSP), Registered Pension Plans (RPPs), pension plans with life insurance, and Locked-In Retirement Accounts (LIRA).

Savings Not Exempt in Bankruptcy

Various savings or investment products are not exempt in the case of bankruptcy. These include mutual funds, marketable securities, rental income properties, and Tax-Free Saving Accounts (TFSA).

Navigating Personal Bankruptcies with Expert Assistance

If considering bankruptcy, it’s essential to consult with licensed trustees who can help explain your rights and assess your assets. They can provide invaluable assistance, ensuring you’re well-informed during the process.

Taking the First Step Towards A Debt-Free Life

If overwhelmed by debt, it’s crucial to seek professional help. A free, confidential appointment with a licensed trustee can provide clarity on your financial situation and discuss all of your options.


Understanding the nuances of bankruptcy and its impact on your pension can be challenging. But remember, “If I go bankrupt, will I lose my pension in Canada?” is a question with many variables. It’s crucial to seek professional advice to ensure you’re making informed decisions about your financial future.

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