Can You Keep Your Car When You File Bankruptcy?

Navigating Bankruptcy: Is Your Vehicle Safe?

When confronted with the daunting prospect of bankruptcy, concerns often center around the potential loss of possessions. One of the primary questions that arise is: Can you keep your car when you file bankruptcy? The answer, contrary to popular misconception, is not necessarily a resounding no. This article delves into the various factors that determine if you can hold onto your vehicle during bankruptcy.

Bankruptcy and Your Vehicle: A General Overview

When declaring bankruptcy, individuals often fear the loss of their assets. However, this isn’t necessarily the case. Most individuals in Canada who file bankruptcy can retain their vehicle. The general belief that filing bankruptcy results in the forfeiture of all possessions is a myth. Whether you can keep your vehicle during bankruptcy depends on several factors, such as your ownership status, the vehicle’s value and if it’s leased or financed.

Key Factors in Retaining Your Vehicle

When filing for bankruptcy, the decision to keep your vehicle hinges on the following variables:

  • Vehicle Ownership: Do you own your vehicle outright or is it financed? If you possess clear title to your vehicle, meaning there are no liens, you can usually keep it as long as its value falls within your provincial value limits.
  • Vehicle Value: If your vehicle’s worth is within the provincial exemption limit, you can retain it. However, if the value exceeds the limit, you would need to pay the surplus amount to the bankruptcy estate.

Understanding Bankruptcy Exemptions

Every province in Canada has a set of bankruptcy exemptions. These exemptions allow individuals to keep their assets up to a certain value. Vehicles are included in these exemptions, and the limits differ between provinces.

Bankruptcy Exemptions Across Provinces

Below is a table detailing the vehicle exemption limits across provinces as of 2022.

Province Vehicle Value
Alberta Up to $5,000
British Columbia Up to $5,000 ($2,000 if behind on child support payments)
Manitoba Up to $3,000 (must be for business or travel to work)
New Brunswick Up to $6,000
Newfoundland Up to $2,000
Nova Scotia Up to $6,500
Ontario Up to $7,117
Prince Edward Island Up to $6,500 (if used for work) otherwise, up to $3,000
Saskatchewan Up to $10,000

Note: Quebec, Yukon, Northwest Territories, and Nunavut do not have specified exemption limits.

Bankruptcy and Financed or Leased Cars

If your vehicle is financed or leased, the financing amount is deducted from the vehicle’s value to determine its net value. Any remaining equity must be paid to the bankruptcy estate. However, as long as you can maintain your car payments and stay current, you can keep your vehicle.

Consumer Proposals: An Alternative Route

If your vehicle’s worth exceeds the provincial exemption limits, a consumer proposal could be an option. A consumer proposal is a legal method of debt relief that settles debts with your creditors, often reducing your debt by up to 80%.

In a consumer proposal, you work with a Licensed Insolvency Trustee to make a settlement offer to your creditors. If accepted, you make manageable monthly payments until the consumer proposal is discharged. One of the key benefits of a consumer proposal is the ability to keep all your assets, including your car and home.

Final Thoughts

The question, “Can you keep your car when you file bankruptcy?” does not have a one-size-fits-all answer. It depends on several factors, including your vehicle’s value, your province’s exemption limits, and the specifics of your financial situation.

If you’re considering bankruptcy and are concerned about your vehicle, it’s crucial to consult with a Licensed Insolvency Trustee. They can provide guidance and help you explore all available options, ensuring you make an informed decision that best suits your circumstances.

In conclusion, bankruptcy does not automatically mean you lose everything. With the right guidance and careful navigation, you can weather the storm and come out stronger on the other side.

Note: The information in this article is intended to be a general guide. It does not constitute financial advice. Specific advice should be sought from a legal professional before taking any action.

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