RRSP Home Buyers Plan & Bankruptcy

house mortgage

RRSP Home Buyers Plan

With the prices of real estate continuing to rise, getting a proper down payment for some may need to come from ones RRSP via the Home Buyers Plan. The HBP allows one to withdraw money from the RRSP account to be used for down payment of the real estate property.

Repay your Home Buyers Plan Loan

When the time comes for you to start paying back on your loan, the CRA will send out a HBP Statement of Account. This is a yearly notice that is included within your income tax notice of assessment. This will show the withdrawn amounts and also show the amount that is left to repay in total and the amount that is due that year. Repayments to this can be made in the same time format of your RRSP contributions.

Generally you will be looking at repaying this over the course of 15 years, with paying back yearly 1/15th of the total amount. Granted you can pay it back at a higher rate, but this is the minimum requirements. So essentially you will be repaying this loan until the HBP balance is back to zero.

Bankruptcy and your Home Buyers Plan Payments

With regards to your HBP and your real estate property. If you either decide to sell or if for some unfortunate event you are forced to file for Bankruptcy, you are still required to repay/make your Home Buyers Plan repayments. Any remaining payments have to be reported as income.

If you have Home Buyers Plan payments remaining when your RRSP matures for the year that you are 69, the remaining HBP loan amount must be either fully repaid or it will need to be reported as income.

If You Do Not Repay

If you opt to not repay your Home Buyers Plan, the amount that you are owing for that particular year, will be included as income and it will be subjected to tax as well.

For more information, please see the official site from the Government of Canada http://www.cra-arc.gc.ca/hbp/

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