RRSPs now protected as bankruptcy laws change

News Release
Hoyes

KITCHENER, ON, July 8 /CNW/ - In a surprise and unprecedented move, with no advance notice the federal government yesterday implemented two significant changes to federal bankruptcy law.
“The rules came into effect with no prior warning,” says Douglas Hoyes, a trustee in bankruptcy with Hoyes, Michalos & Associates Inc. “The new laws will have an immediate and significant impact on the hundreds of thousands of Canadians with student loan debt.”
Amendments to the Bankruptcy & Insolvency Act contained in Bill C-12 were given Royal Assent on December 14, 2007, but did not immediately come into force to give the government time to draft the supporting regulations. In a surprise announcement, yesterday the Minister of Labour signed an Order in Council to immediately implement only two sections of the new legislation.
First, in a bankruptcy student loans will be automatically discharged if they are more than seven years old, as compared to the previous ten year rule.
“This change will impact tens of thousands of former students who are currently experiencing a crushing burden of debt,” says Ted Michalos, a trustee in bankruptcy with Hoyes, Michalos & Associates Inc.
In an effort to make the treatment of RRSPs similar to the treatment of pensions in a bankruptcy, the second change allows a bankrupt person to keep their RRSP in a bankruptcy, except for contributions made in the year prior to bankruptcy.
Canadians in financial trouble are urged to contact a licensed bankruptcy trustee to determine if the new rules will help alleviate their financial problems.
Further information, and a complete copy of the submission to the Senate Committee, can be found at http://www.hoyes.com