Can Unsecured Creditors Take My Car For An Unpaid Debt?

Unsecured creditors shouldn’t be able to take your vehicle – right?


It’s not quite that straightforward, so you should read on.

If you’re in any type of debt and it’s gotten out of hand, it’s important to know all the facts about how unsecured creditors can legally go about recovery.

Knowing the facts about your situation and acting on all the notices you receive in the mail is extremely wise when creditors come a calling.

That includes every sort of lender too – from payday loan providers to the banks.

If you’re surprised by this – you’re not alone – but, it’s worth asking yourself the question, how can unsecured creditors take my car for an unpaid debt?

At least – it’s better to ask the question now and find out the facts than it is to lose your car because you didn’t know.

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Unsecured Lenders Can Seize your Car – if You Let Them

It’s reasonable to expect a secured creditor to utilize a claim on your property due to unpaid debt.

However, not many of us realize there are legal ways an unsecured lender can do pretty much the same.

For most of us, the very last thing we need when we’re trying to get back on top of debt is to lose our car.

We need it for work – and losing a vehicle can be a disaster.

The fact is, any creditor can apply for a judgement against you.

That means they can go to a court and get a seizure writ against your car, for example.

Once that’s done, they just need to get a sheriff or bailiff to remove the vehicle physically.

Filing a consumer proposal or for bankruptcy can stop this from happening – but if you haven’t done that – how likely is an unsecured creditor to try and seize your car?

Watch out for Unscrupulous Lenders

The answer to that question is – it depends.

Partly, it’s going to come down to how aggressive the creditor is about debt collection – and we see some very aggressive tactics from payday lenders sometimes.

We’ll look at Ontario as an example, and let’s say you live there, but have an outstanding payday loan debt.

Well, in Ontario, you get the benefit of a clause in the Execution Act that says any motor vehicle up to the value of $6,600 can’t be seized.

However, that doesn’t mean your car is completely safe just yet.

Claiming an Exemption in Ontario

To understand why, it’s helpful to know that the onus is on you to protect yourself – or more accurately, your car.

That’s mainly because of a recent change in the laws regarding execution orders – and the fact that some unscrupulous lenders will try and pull a fast one.

In 2015, Ontario tweaked the rules around exempt items and seizure.

Basically, what the law says is that if a bailiff or sheriff intends to take away an item which is theoretically exempt – they need to serve you notice that you have a right to claim it as exempt.

You get just five days to do so – but it’s imperative you do – because it won’t be exempt after that.

In such a case, that opportunistic lender can take your vehicle (or any asset they pursue) and sell it.


That’s slightly understandable, but if you’re going to take anything away from the exemption rules, make it this – open all your mail when you’re in debt and don’t avoid the scary-looking items.

There’s a danger of just letting notices pile up when your finances are out of control – it’s depressing to read most of the mail anyway – but you can get caught out.

Using an Exemption but Allowing a Sale

Now, seizures of property by unsecured creditors can work for you under certain circumstances.

It depends on what your specific situation is, but you might be happy to let a creditor take an asset in some cases.

Let’s say that payday loan debt you have is for $12,000.

You could claim the exemption but tell them it’s ok to go ahead and sell your car anyway.

The proceeds of any such sale go like this:


  • First, the cost of the sale gets met.

    If your vehicle sold for $10,000 and the commission was 15% – the auction house would get paid $1,500 first.

  • Next up to be paid is you.

    Your exemption allows you $6,600.

    You’re free to go and use that to buy a cheaper vehicle to use for work.

  • Last but not least is the lender.

    Out of the $10,000 sale, they get the remaining $1,900 – which goes towards paying down your $12,000 debt.


Get the Advice You Need When You’re Stuck in Debt

It’s debatable whether or not most lenders would bother to go to auction with your car.

However, the danger here is that a less honorable credit provider might try to get the full value of your vehicle – just because you didn’t know your rights.

When your debt is out of control, and the notices are piling up, it’s crucial you get the proper advice.

Here at BankruptcyCanada, we’ve helped thousands of people affected by debt – our friendly team are waiting for your call on (877) 879-4770 (24/7).

Don’t let the situation get worse – talk with us today about your options.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?

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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