Bankruptcy Exemptions

Bankruptcy Property Exemptions:
What Assets are Exempt From
Bankruptcy in Canada?

Filing for bankruptcy can be a daunting and overwhelming process. However, it’s essential to understand that bankruptcy is not meant to be punitive but rather a means to provide individuals with a fresh start and protection from creditors. When you file for bankruptcy, you will assign or surrender your assets to a licensed insolvency trustee in exchange for the discharge of your debts. The good news is that there are bankruptcy exemptions in place that allow you to keep certain assets deemed essential for your reasonable living expenses.

In Canada, bankruptcy exemptions are set by provincial legislation, and the specific rules and regulations vary from province to province. These exemptions determine which assets you can keep during the bankruptcy process. It’s important to note that the information provided in this article is accurate at the time of publication, but it’s always best to consult with a licensed insolvency trustee to understand how bankruptcy exemptions may affect your unique financial situation.

Bankruptcy Exemptions by Province

Bankruptcy exemptions in Canada are determined by provincial legislation. Each province sets its own rules and regulations regarding the assets that can be exempt from seizure in a bankruptcy. The following sections outline the bankruptcy exemptions for each province in Canada, highlighting the maximum amounts of exemption for various categories of assets.

Choose your province or territory:

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Understanding Bankruptcy Exemptions

Bankruptcy exemptions are designed to ensure that individuals going through the bankruptcy process can maintain a reasonable standard of living. These exemptions protect specific assets from being seized by the trustee to satisfy unpaid debts. While the exact exemptions may differ across provinces, there are common types of assets that are generally exempt from seizure in bankruptcy.

The following are examples of assets that may be exempt in a bankruptcy:

  1. Personal Items and Clothing: Necessary clothing and personal effects are typically exempt from seizure. This includes items like clothing, jewelry, and sentimental belongings.

  2. Household Furniture and Appliances: Essential household furnishings and appliances needed for day-to-day living are usually exempt. Examples of exempt items may include furniture, kitchen appliances, and electronic devices.

  3. Tools of Trade: Tools and equipment required for your work or trade may be exempt. This exemption ensures that individuals can continue to earn a living and support themselves.

  4. Motor Vehicles: In most provinces, you can keep a motor vehicle with a value up to a certain limit. However, the value thresholds may vary, and it’s important to check the specific rules in your province.

  5. Farming and Fishing Property: If your primary occupation is farming or fishing, certain property and equipment necessary for your agricultural operations may be exempt. This includes livestock, farming machinery, and land.

  6. Registered Retirement Savings Plans (RRSPs) and Pensions: In many cases, your RRSPs, pensions, and other retirement savings plans are exempt from seizure. However, contributions made within the 12 months prior to bankruptcy may not be exempt.

  7. Health and Medical Aids: Necessary medical aids and equipment required for your health and well-being are typically exempt. This ensures that individuals have access to essential healthcare items.

It’s important to note that these are general examples of assets that may be exempt in a bankruptcy. The specific exemptions and maximum amounts allowed vary by province. To determine the exact exemptions applicable to your situation, it’s best to consult with a licensed insolvency trustee who can provide up-to-date information and guidance.
 

One of the major tenets of Canadian bankruptcy law is that a person, overwhelmed by debt, deserves the opportunity of a fresh financial start.

Part of that fresh start includes leaving the person with enough possessions to maintain dignity and to help that person towards his or her fresh start.

The property exempt form seizure, in a bankruptcy, is set by the provinces and territories.

Nunavut Bankruptcy Exemptions

Nunavut bankruptcy exemptionsNunavut Bankruptcy Exemptions are:

Household goods – unlimited; Clothing – unlimited; Food – 12 months; Tools of Trade – unlimited; Hunting Tools – unlimited; Residence – $35,000; Vehicle – unlimited; Medical Aids – unlimited.

Exemptions are in effect for all registered retirement savings plans (RRSP’s, RRIF’s and DPSP’s (Deferred Profit Sharing Plans).

  • Contributions made in the 12 months prior to the date of bankruptcy will be recovered (clawed back) for the benefit of the bankruptcy estate for RRSPs in provinces without RRSP exemption laws (BC, Alberta, Ontario, NB, and NS);
  • There will be no upper cap on the amount of RRSPs that can be protected;
  • There will be no need to set up the RRSPs in a locked in plan to make them eligible for exemption;
  • The court will have no jurisdiction to extend the one year claw back period period in an appropriate case.

NWT Bankruptcy Exemptions

NWT bankruptcy exemptions

NWT Bankruptcy Exemptions are:

Household goods – $5,000; Clothing – unlimited; Food – 12 months; Tools of Trade – $12,000; Hunting Tools – $15,000; Residence – $50,000; Vehicle – $6,000; Medical Aids – unlimited.

Exemptions are in effect for all registered retirement savings plans (RRSP’s, RRIF’s and DPSP’s (Deferred Profit Sharing Plans).

  • Contributions made in the 12 months prior to the date of bankruptcy will be recovered (clawed back) for the benefit of the bankruptcy estate for RRSPs in provinces without RRSP exemption laws (BC, Alberta, Ontario, NB, and NS);
  • There will be no upper cap on the amount of RRSPs that can be protected;
  • There will be no need to set up the RRSPs in a locked in plan to make them eligible for exemption;
  • The court will have no jurisdiction to extend the one year claw back period period in an appropriate case.

Yukon Bankruptcy Exemptions

Yukon bankruptcy exemptions

Yukon Bankruptcy Exemptions are:

Exemptions Act

Personal Property:

Paragraph 2(1)(a) and subsection 2(2) provide an exemption for household furniture, utensils and equipment that are contained in and form part of the debtor’s permanent home.

Paragraph 2(1)(b); necessary and ordinary clothing of the debtor and the family of the debtor;

Paragraph 2(1)(c); food, fuel and other necessaries of life required by the debtor and the family of the debtor for the next 12 months;

Paragraph 2(1)(d) provides an exemption for tools, implements and other chattels necessary to, and actually used by the debtor in his business, profession or calling (not exceeding $600.00).

House, buildings and lot:

Paragraph 2(1)(e) provides an exemption for the house and buildings occupied by the debtor and the lot on which they are situated (not exceeding $3,000.00).

RRSP’s associated with life insurance policies are exempt from seizure or attachment.

The Exemptions apply to all registered retirement savings plans (RRSP’s, RRIF’s and DPSP’s (Deferred Profit Sharing Plans).

  • Contributions made in the 12 months prior to the date of bankruptcy will be recovered (clawed back) for the benefit of the bankruptcy estate for RRSPs in provinces without RRSP exemption laws (BC, Alberta, Ontario, NB, and NS);
  • RRSPs will have no upper cap limit that can be protected by the exemptions;
  • RRSPs will be protected by the exemptions in your province even if they are not in a locked in plan;
  • The one year period in which RRSP contributions can be recovered for the bankruptcy estate cannot be extended by the courts in an appropriate case.

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