Can Creditors Repossess My Car?

Car Repossession & Unpaid Debts

If you’re in debt, one of the main concerns that you might have is whether or not your creditors can take your assets as a way of accruing some or all of the payment that you owe them.

And one of these assets could be your beloved car.

A concern that many people have, it’s important to realize the likelihood of your vehicle being taken, so that you’re ready for what will happen.

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Secured Vs. Unsecured 

In Canada when you file for bankruptcy, the main worry is that you’ll lose everything the moment that the process begins.

However, it will depend wholly on whether that debt is secured or unsecured.

The primary difference between these two types of debts is the presence or absence of collateral.

This is the form of security that you’ve given to your lender as a way of backing the debt.

If Your Car is Financed with a Loan

When it comes to vehicles, if it’s financed with a car loan and the borrower fails to make payments on time, the lender is able to repossess the vehicle.

Known as a secured lender, they have the opportunity to take the car off you once you’ve missed one or several payments.

In some cases, you are able to sell the vehicle once you’ve made arrangements with the lender.

The money that’s gained from this sale will then be used to pay off the loan.

However, with this option, you need to keep in mind that if it sells less than the remaining balance of the loan, you’ll need to make up the rest of the money.

If You Own The Car Outright

However, if you own the car outright, the situation is very different.

If you own the vehicle and you owe money to what’s known as unsecured creditors (e.g credit card companies) and you don’t pay on time, then a few things can happen.

At the start of the process if you haven’t filed for bankruptcy, the unsecured creditors are able to obtain a judgment against you by acquiring a Writ of Execution. Through this, they can seize certain things from you – including your bank accounts, property and your wages.

The Executions Act

There is, however, an exception to this rule in Canada.

Under the Executions Act (1990), you are able to keep your vehicle if it’s market value is under a certain amount.

A law that applied in a bankruptcy filing as well, it’s vital that you’re aware of how this act can affect the likelihood of your car being taken by creditors.

Of course, all provinces in Canada have their own Executions Act that states their particular exemptions.

However, they all state that certain assets that are considered as basic necessities, such as a vehicle can be protected from creditors if you follow the correct steps.

Ontario’s Execution Act, for example, states that if your vehicle is worth less than $6,600 you will be able to keep it.

This also applies if you’re filing for bankruptcy.

If it’s worth more than this, however, then you’ll have to pay the difference between its value and the exemption limit of $6,600.

Other examples are Alberta which has an exemption limit of $5,000, British Columbia at $5,000, Saskatchewan at $10,000 and Manitoba at $3,000.

Once this difference is paid on top of the limit, you’ll be able to keep your car and not lose it in bankruptcy.

Here’s an example to help explain the equity that can be on a car loan:

Value of the car (when measured against a fair market) – $8,000

Car loan balance ($11,000)

Equity – $3,000

Why You Should Keep Your Car

If you have a car loan and you want to keep your vehicle but you’re thinking of filing for bankruptcy, it’s worth trying to keep up your car loan payments from the get-go.

This will ensure that your credit isn’t tarnished and that your finances can slowly recover.

Find Out More Today

Do you want to find out more about what assets creditors can take if you file for bankruptcy or are in debt?

Then get in contact with one of our local and licensed trustees today by calling us on (877) 879-4770 or by emailing us through our online form.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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