IFIC urges bankruptcy protection for RDSP beneficiaries

The group is asking for policy changes that would align it with other protection measures

IFIC urges bankruptcy protection for RDSP beneficiaries
In a January 9 submission to the government of Canada, the Investment Funds Institute of Canada (IFIC) has appealed for an amendment to the Bankruptcy and Insolvency Act, asking that creditor protection be extended to all contributions made to registered disability savings plans (RDSPs).

“The RDSP was created to help provide disabled persons with a stable income stream to help pay for their basic needs,” said IFIC President and CEO Paul Borque. “The current law undermines that goal by permitting individually contributed RDSP assets to be seized as part of a bankruptcy proceeding against a beneficiary.”

While the current bankruptcy legislation grants creditor protection for RDSPs, that protection is restricted only to the portion of RDSP contributions that came from the government. Contributions made by family members and other individuals can still be seized by trustees in the event of bankruptcy.

“This policy holds the potential to impose significant hardships on some of Canada’s most financially vulnerable citizens,” Bourque said. “IFIC members report that it also discourages some parents from establishing RDSPs.”

The IFIC pointed out that registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) — which both get funded exclusively through individual contributions — are already given creditor protection.

“We believe that people with disabilities deserve equal protection for the funds contributed on their behalf,” Bourque said.

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