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What Assets Are Exempt From Personal Bankruptcy?
If you declare bankruptcy in Canada, you are allowed to keep certain assets. Discover what those are and how it may affect your unique debt situation.
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If you declare bankruptcy in Canada, you are allowed to keep certain assets. The assets that are exempt from bankruptcy are called Exempt Assets. These are basic assets needed for day-to day living. Each Province has different basic Exemptions. These assets are called Exempt Assets, as they are exempt from seizure from creditors (even without a bankruptcy) and your trustee (with a bankruptcy).
When it comes to bankruptcy and assets, why are some assets exempt?
Bankruptcy allows an honest, but unfortunate debtor to get a fresh financial start. When you file for bankruptcy, you surrender most of your assets to your Licensed Insolvency Trustee. The Trustee then turns those assets into cash (liquidates them) and distributes the money to your creditors.
However, not all assets need to be surrender. What are your likely exemptions? What can you keep in a bankruptcy? Legislators have concluded that each personal should be able to keep some basic personal assets away (or exempt from) creditors or even from a trustee in bankruptcy. This allows debtors to make a fresh start without debt, with a little help with by keeping a few basic assets.
Bankruptcy and Assets: Which Are Exempt?
Every province and territory in Canada have their own specific list of Exempt Assets. Detailed list of Provincial Exempt Assets Lists by province. You must be residing in the province to claim your exemption in the specific province.
When consider filing a personal bankruptcy, the Bankruptcy and Insolvency Act defines three kinds of basic asset exemptions; Assets neither your trustee nor your creditors can take from you in the course of the bankruptcy process:
- Property you hold in trust for other persons.(Trust Property)
- GST credit payments and prescribed payments relating to your family’s essential needs. (GST Refunds – federal portion)
- Other provincially described exemption : Exempt Assets
Generally the provinces and territories define Exempt Assets as including some or all of the following categories: (NOTE: values can vary greatly from province to province)
- Food and heating fuel needed by you and your dependents
- Clothing needed by you and your dependants
- Household furnishings and appliances
- One motor vehicle (sometimes only if needed to earn your living)
- Health (medical, dental, etc.) aids needed by you and your dependants
- The tools of your trade: tools, equipment, and books needed to earn money from your non-farming occupation
- Farm property: farmland where your principal residence is located, plus required operating equipment, livestock, and other property
- Your principal residence (house or mobile home)
- Some land
- Sentimental items, including pets
- Pensions or retirement savings
- Miscellaneous categories in some provinces
The tools exemption and the farm exemption (if applicable) cannot both be taken; you may claim one category only, which applies to your principal occupation.
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Will I lose my house if I file for bankruptcy?
Your ability to keep your home after a bankruptcy depends on several factors. Certain provinces exempt some or all the value of a principal residence. In most provinces, your home can be one of the assets subject to liquidation in a bankruptcy. The discussion about the equity in your home is usually one of the key areas to consider when meeting with your Licenses Insolvency Trustee. Initial Consultation. Only the equity portion of your home is considered (value of home less the secured mortgage)
At times, if you home has significant equity, a home equity loan may be an option to pay down your personal debts. Alternatively, in a bankruptcy you may be able to keep you home by making payments to your trustee over the bankruptcy period.
If you are considering this option, the trustee can help you decide if keeping your home is the most prudent financial strategy.
Can you keep your car if you file for bankruptcy?
Most provincial regulations include an exemption for some or all of the value of your car. Additionally, in BC if you use your vehicle for work, you had an additional exemption.. If you are making payments on your car, retaining the car will depend partly on whether you can continue the payments and how much equity you have built up. C.E. Craig & Associates Inc can explain how the regulations will apply to your specific situation.
Provincial exemptions for homes and cars can be confusing, especially when considering mortgages and leases. A Licensed Insolvency Trustee will gladly help you learn how these assets would be affected in a bankruptcy. Your conversation is confidential and you are under no obligation. Call us today for a Free Consultation.
What about my RRSP’s and other investments?
RRSPs are exempt, however, the contributions made in the one-year period before the date of bankruptcy will have to be paid to the Trustee for the benefit of creditors.
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