If I Go Bankrupt Will I Lose My Pension?
Pensions in Bankruptcy
One of the key reasons people seek bankruptcy is to manage their financial future.
Resultantly, a major concern related to going bankrupt is the risk of losing your pension.
Workers pay into pension funds from the start of their careers, via the Canada Pension Plan (CPP).
You can see this deduction on every paycheck; though, knowing it pays off in the future helps take some of the sting out of the lack of immediate funds.
Often, seniors only have funds via their pension, whether that is Old Age Security or CPP.
However, if the debt is already there before the retirement years, then debt accrual becomes a real issue.
If the retiree was barely making payments before the pay cut affected by retirement, these debts can quickly get out of control.
Good News About Pensions
The good news related to pensions is that the funds are protected from bankruptcy.
This means that your pension funds won’t be seized or garnished by creditors in the event of your struggling with debt.
They will not be lost due to bankruptcy so you can rest easy knowing that this source of income remains intact – even when you get a trustee to take you through bankruptcy.
However, RRSPs are not as cut and dry.
Generally, the funds are protected, though in the year leading up to bankruptcy, they are eligible for seizure.
Bear this in mind when considering your fiscal options during retirement.
Ask For Help
If you are struggling with your finances and considering the options for recovery, the first step is to consult a Licensed Insolvency Trustee.
These trained, objective professionals can help you budget your funds to avoid bankruptcy – if possible.
If not, they can outline for you the best course of action to keep your finances in good tact and still allow you a good quality of life.