Bankruptcy and Assets
Bankruptcy and Assets
While many people consider bankruptcy as one of the most effective ways to deal with severe debt, it’s important to remember that you’ll likely need to give up some of your assets in order to complete the process. Thankfully, most of the assets you can keep are related to supporting a basic lifestyle and maintaining dignity. However, it’s still a good idea to understand what you can keep since many of the limits are based around a dollar value. These limits also change depending on the province that you’re claiming bankruptcy from.
Exemptions by province
Exemptions differ from province to province. For example, in Ontario, you’ll face the following bankruptcy exemptions:
- You can keep all of your clothes for you and your family
- Household furniture, utensils, equipment, food and fuel up to $13,150
- Any tools and instruments used in your business up to a value of $11,300
- A motor vehicle up to $6,600
- If the equity of your home is under $10,000, you’ll be able to keep your home
- If the equity of your home is above $10,000, your home is not exempt
- Most life insurance policies and pension plans
- RRSPs, exception for contributions in the 12 months before your bankruptcy file date
- Farmers are also exempt up to $29,100 for livestock, fowl, bees, books, tools and other implements of the trade
These exemptions are specific for Ontario. Your assets need to be evaluated by a Licensed Insolvency Trustee before they are taking into consideration. Let’s take a closer look at these asset categories to help you understand what assets you’ll likely be able to keep.
As the category suggests, you’ll be able to keep all of your clothing after filing for bankruptcy in Ontario. Your family will also be able to keep their clothing.
Anything from your furniture to your television and even dishes will be counted into the household items category. This limit is $13,150, giving you plenty of value to consider what you want to keep. This can even include things such as entertainment-related devices, works of art and so on. These items will be valued independently.
Tools of the trade
This can include anything that you use for business purposes. This can also include things such as a laptop or computer if you work from home. Again, this will be evaluated independently and you’ll need to explain your assets and what they are used for. $11,300 is a considerable amount for most people to retain all of their work-related goods.
In most cases, this is going to refer to a family vehicle of some sort. The value will depend on the age of the vehicle, so there’s a good chance that your vehicle will be exempt in Ontario after you file for bankruptcy. However, if the car is worth more than this value, you’ll have the option to pay the difference and keep it. If the vehicle isn’t yours (for example, if you’ve leased it) then the vehicle will stay in the driveway since you do not technically own it.
In most cases, you’ll be able to keep your home. If the equity of your home is below $10,000 then you’ll be able to keep it without any issues and the trustee won’t bother calculating anything. If the equity in your home is higher, then you won’t qualify for exemption and you may need to pay an excess to keep your home. You’ll still be able to keep your home if you increase your monthly payments or extend your bankruptcy period.
Life insurance and pensions
If your pension plan is locked in until you retire then it’s often exempt from seizure. Any life insurance policies that have a preferred beneficiary, such as a parent, spouse or child, will also be exempt.
Any contributions made to your RRSP 12 months before your bankruptcy claim can be recovered for the benefit of the bankruptcy estate. However, any contributions to the fund before the 12 month period would be exempt.
This refers to any equipment that is needed to help you run a farm as a self-employed business. For instance, if you have livestock and farming-related equipment, they will be exempt up to $29,100. This may require specialists to value your livestock and equipment
You’ll be able to keep most of your assets
In short, filing for bankruptcy means you can keep most of your assets up to a certain value. In many provinces, such as Ontario, you’ll be able to keep a considerable amount of value even after filing for bankruptcy. However, in other provinces, the exemption amount might be a lot lower and there may be special exceptions.
For instance, New Brunswick has very specific exemptions for farm properties. This includes being able to keep only two horses and sets of harnesses, two cows, ten sheep, two hogs and 20 fowl. As another example, Nova Scotia only allows motor vehicles up to a value of $3,000, but this increases to $6,500 if the vehicle is used for work purposes.
It’s important to look at the exemptions for your specific province. Thankfully, contacting a Licensed Insolvency Trustee will generally make the process of filing for bankruptcy a lot easier. In addition, they’ll be able to suggest which items you should keep and what items they would recommend you forfeit. We understand that it can be difficult to go through a process like bankruptcy, especially when it comes to retaining your assets that are essential for your everyday life.
If you’d like more assistance with bankruptcy, don’t hesitate to contact us today for more information. We can connect you with reputable Trustees in your province that can help you get a better understanding of what it means to file for bankruptcy.