Declaring bankruptcy can be a daunting process, and one of the common concerns for many individuals is the potential loss of their personal belongings. However, Canadian bankruptcy laws are designed to protect debtors from losing everything they own. A key aspect of these laws is the concept of “exempt assets” or possessions that you are allowed to retain even after declaring bankruptcy. In Manitoba, these exemptions are particularly relevant and can significantly impact your post-bankruptcy life.
Understanding Bankruptcy Exemptions
Bankruptcy is not designed to strip you off of all your possessions. Rather, it is a legal process aimed at providing relief from overwhelming debt while ensuring fairness to creditors. Part of this fairness includes the concept of exemptions, items that are protected from seizure in a bankruptcy.
Exemptions vary by province, and in Manitoba, they are governed by provincial law. It’s important to note that these exemptions apply to the equity in your assets, not just the assets themselves. Equity is the value of an asset after subtracting any loans or liens against it.
Your Licensed Insolvency Trustee is the best source of information on which of your possessions fall under these exemptions.
Manitoba Bankruptcy Exemptions
In Manitoba, exemptions cover various categories of belongings that are deemed essential for a basic standard of living. They include:
- Furniture, household furnishings, appliances: up to $4,500;
- Automobile: one up to $3,000 in equity;
- Food/fuel: enough for a six-month supply for your family, or the cash equivalent;
- Home: up to $2500 in equity;
- Tools of the trade: up to $7,500;
- Several items without a monetary limit can also be kept, including necessary clothing, health aids, items needed for religious worship, RRSPs, RRIFs, DPSPs, and pets.
Calculating Exemptions
Exemptions are usually based on an item’s value rather than the item itself. When declaring bankruptcy, you’re required to list your assets and provide a general estimate of their value.
For items like homes and vehicles, the exemption limits are based on equity. For instance, if your car is worth $15,000 and you owe $12,000 on it, you can keep it because the equity falls under the $3,000 exemption limit.
Consultation is key to understanding these exemptions. Don’t hesitate to book a free consultation with a Licensed Insolvency Trustee.
Next Steps
If you’re contemplating bankruptcy, your first point of action should be to contact a Licensed Insolvency Trustee. They can tell you exactly what you can keep and what you’ll have to surrender if you file for bankruptcy. They can also discuss alternatives to bankruptcy.
Bankruptcy is not the end. It can offer a fresh start by eliminating unmanageable debt. In Manitoba, the bankruptcy exemptions ensure you don’t lose everything when you start over.
Keeping Your Income And Car During Bankruptcy
Your take-home pay may be payable to the Licensed Insolvency Trustee for creditor benefit. The payment amount depends on the family unit’s take-home pay, the number of people in the family, and non-discretionary expenses such as child care or child support.
If you can continue making loan payments during your bankruptcy, you may be able to keep your vehicle. However, if your vehicle’s value exceeds the exemption limit, you can “buy-back” the amount exceeding the limit.
Keeping Your House During Bankruptcy
If your home equity falls within exemption limits, and you can continue making mortgage payments, you may keep your home. Home equity is determined by subtracting what you owe (mortgage and property taxes) from the asset’s value. If the home equity exceeds the exemption limit considerably, some homeowners may use this to pay off creditors.
Provincial Differences In Exemptions
Exemptions vary significantly across provinces. For instance, Alberta allows you to keep food required for the next 12 months, necessary clothing up to $4,000, and household furnishings and appliances up to $4,000. On the other hand, British Columbia allows equity in a home in Greater Vancouver and Victoria up to $12,000 and household items up to $4,000.
To understand how bankruptcy affects exempt assets in your province, book a free consultation with a Licensed Insolvency Trustee.
In conclusion, if you’re contemplating bankruptcy, understanding “How Does Bankruptcy Affect Exempt Assets In Manitoba” and other provinces can help make the process less daunting. It’s essential to consult with a Licensed Insolvency Trustee, who can provide accurate information tailored to your unique situation. Remember, bankruptcy isn’t the end, but a new beginning towards financial recovery.
