What happens to my child’s RESP if I file a bankruptcy or consumer proposal in Sarnia?

by Joel Sandwith on October 3, 2013

Hello all, I’ve been getting this question a lot this past week or two so I thought I’d share the answer on the blog.

As I’m guessing you are aware, an RESP (Registered Education Savings Plan) is a financial tool you can use to help save for your child’s education.  You deposit money, after tax, in the RESP, the government adds 20% (nice bonus!) and when the child goes to college or university they get the money to help with the costs.

Many of my clients have these – often they were set up when times were good, and now they are coming to see me because of job loss, etc.

Most people believe that the RESP is protected, because ‘it’s for the kids’.  They are often surprised to find out that if they file bankruptcy, and they own an RESP for their child, the trustee may have to collapse the RESP plan and take the money out to pay their creditors!

I should explain that this is not exactly how it always happens, often I am able to help my clients keep the RESP by making a deal with them to ‘pay’ to keep it.

But, having said that, here is a very important piece of information:  if you file a Consumer Proposal instead of bankruptcy we can arrange it so that you will keep every dime of that RESP for your kids!  This is in many cases the number one reason to look at a proposal – so that you can maintain control of your assets while dealing with your debts.

Got debt?  Give me a call, 866-747-0660, 310-PLAN (7526 no area code required), or locally here in Sarnia at 519-344-1058.  It’s free to meet with me, no up front fees.

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