Can I Retain My Property if I Declare Bankruptcy in BC or the Yukon Territory?
The process of declaring bankruptcy can be daunting, particularly when it comes to the fear of losing one’s most cherished asset – the home. However, depending on the province or territory in which you reside, you may be able to keep your home even if you file for bankruptcy. This article aims to provide an in-depth analysis of the possibilities of retaining your property during bankruptcy in British Columbia (BC) and the Yukon Territory.
Understanding Bankruptcy
Bankruptcy is a legal process governed by federal law, specifically the Bankruptcy & Insolvency Act. It is an option for individuals who are unable to pay their debts and owe at least $1,000. It involves handing over most of your assets to a Licensed Insolvency Trustee (LIT) who then liquidates these assets to repay your creditors.
However, the fear that one would lose everything during bankruptcy is not entirely accurate. Each province and territory in Canada has specific rules regarding the types of assets that are exempt from seizure during bankruptcy proceedings.
Home Equity and Bankruptcy
One of the most critical factors determining whether you can retain your home after declaring bankruptcy is the amount of equity you have in your property. Home equity is the difference between the market value of your property and the outstanding mortgage amount.
The amount of home equity you are allowed to retain during a bankruptcy varies by province. In BC, a principal residence has an exemption of $9,000 in equity value outside of the Capital Regional District or Greater Vancouver Area, and $12,000 within. In the Yukon Territory, the exemption is $3,000 for the house and buildings occupied by the debtor.
Provincial Asset Exemptions
Each province and territory allows for certain asset exemptions to ensure individuals filing for bankruptcy maintain a reasonable standard of living. For instance, in BC, you can generally keep the following property:
- Food required by you and your dependents during the next 12 months;
- Necessary clothing up to a value of $4,000;
- Household furnishings and appliances to a value of $4,000;
- One motor vehicle not exceeding a value of $5,000 (equity);
- Medical and dental aids required by you and your dependents;
- The equity in your principal residence, including a mobile home, up to a value of $40,000.
In the Yukon Territory, the exemptions include household furniture, utensils, and equipment up to $200, clothes for you and your family, food, fuel, and other necessities of life for your family for 12 months, and livestock, fowl, bees, books and tools used by you or your business up to $600.
Paying the Non-Exempt Equity
If your home equity exceeds the provincial exemption limit, you must pay the difference to keep your home. If you’re unable to make a lump-sum payment, there are several options available. You could arrange a payment plan with your LIT, have a family member make the payment, or have a family member purchase your home and provide the equity value to your LIT.
Keeping Up with Mortgage Payments
Regardless of the equity situation, it’s crucial to keep up with your mortgage payments during bankruptcy. If you’re unable to make these payments, your lender may proceed with foreclosure. If foreclosure proceedings start after you’ve filed for bankruptcy, you’re legally protected against the mortgage company suing you for the shortfall if they sell the property at a loss.
Other Considerations
If you cannot pay the non-exempt equity or if you choose not to keep your home, your LIT is responsible for selling your property and distributing the proceeds to your creditors. However, if there’s no equity in your home, your mortgage company will begin foreclosure proceedings.
It’s essential to remember that every bankruptcy process is unique and depends on various factors. Therefore, if you’re considering bankruptcy, it’s advisable to consult with a Licensed Insolvency Trustee who can guide you through the process based on your specific circumstances.
Conclusion
The question, “Can I keep my house if I go bankrupt in BC or the Yukon Territory?” is not a straightforward one to answer. It depends on various factors, including your home equity, the provincial asset exemptions, and your ability to keep up with your mortgage payments. However, with the right guidance and careful planning, it may be possible to retain your home even when filing for bankruptcy.
