Pension Protection in Bankruptcy

In the face of financial turmoil, understanding how your retirement savings are protected is crucial. This article delves into the subject of Pension Protection in Bankruptcy, highlighting the rules and regulations that safeguard your retirement nest egg during bankruptcy.

Understanding Bankruptcy and Pension

Bankruptcy is a legal status where a person or business cannot repay their outstanding debts. It starts when the debtor files a petition or, in some cases, when creditors file it. In bankruptcy, your assets are measured and evaluated to repay a portion of outstanding debt.

But what happens to your pension in such a scenario?

Different countries have different rules, but in many jurisdictions like Canada, registered retirement savings are shielded from bankruptcy. The following section explores this in detail.

Pension Protection during Bankruptcy

The good news for retirees is that certain retirement accounts are exempt from seizure during bankruptcy. Registered Retirement Savings Plans (RRSPs), Registered Pension Plans (RPPs), and Locked-in Retirement Accounts (LIRAs) remain protected.

Let’s look at these accounts in more detail:

Registered Retirement Savings Plans (RRSPs)

RRSPs are a type of Canadian account for holding savings and investment assets. They have various tax advantages compared to investing outside of tax-preferred accounts.

Registered Pension Plans (RPPs)

RPPs are a type of legal trust registered with the Canada Revenue Agency and set up by employers to provide pensions to their employees upon retirement.

Locked-in Retirement Accounts (LIRAs)

LIRAs are an investment tool that locks in the pension funds in an investment until a person is of retirement age.

These registered accounts are exempt from seizure during bankruptcy, ensuring that retirees have something to fall back on during tough financial times.

Income Consideration in Bankruptcy

The income you receive from these exempt accounts is considered while determining the income threshold for the bankruptcy. However, you will continue to receive the income for your sustenance!

Other Protected Assets in Bankruptcy

Apart from the registered retirement savings accounts, Canada Pension Plan (CPP) and Old Age Security (OAS) are also protected during bankruptcy.

Unprotected Assets in Bankruptcy

While some assets are safeguarded, others might be at risk. Assets that aren’t protected include Tax-Free Saving Accounts (TFSA) and rental properties.

Pension Protection: A Difficult Conversation

Discussing bankruptcy and its impact on your pension can be challenging. Yet, it’s important to understand that your retirement savings have protection during bankruptcy. If you have further queries about your pension protection, consider reaching out to Pension Investment Officers and Retirement Information Consultants.


Understanding how pension protection works in bankruptcy is crucial for anyone planning their retirement. Despite the financial hardship brought on by bankruptcy, the law ensures that registered retirement savings are safeguarded. While it’s a challenging topic to delve into, being informed about your rights and protections can make the process less daunting.

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