Keeping Your Car in Bankruptcy
Claiming bankruptcy is arguably one of the best ways to get a completely fresh financial start.
It’s often seen as one of the best ways to “reset” your financial situation if you only have a few assets and mounting unsecured debts.
At Bankruptcy Canada, we consider bankruptcy to be one of the quickest and most efficient ways to reset your financial situation, but did you know that it’s possible to keep some of your assets as well?
One of the most concerns we get when people are interested in filing bankruptcy is if they can keep essential assets such as their car.
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After all, if claiming bankruptcy means giving up all of your assets, it makes sense that people are worried about losing their car.
However, the reality is that most Canadians that declare bankruptcy don’t actually lose their car.
This is because their vehicle is considered an essential asset that helps them get to work and perform regular daily tasks such as shopping.
Bankruptcy laws allow you to exempt one vehicle
When claiming bankruptcy, your assets are typically given up to be seized by the trustee.
However, all provinces in Canada have laws that allow you to exempt one vehicle from being seized as long as it meets certain criteria.
This will change depending on the province, but here are the basic values for how much your vehicle can be worth in order to exempt it:
- Alberta – Up to $5,000
- British Columbia – Up to $5,000, or $2,000 if behind on child support payments
- Manitoba – Up to $3,000 if used in employment but no limit for farmers
- New Brunswick – Up to $6,500 if used in employment, potentially more
- Newfoundland & Labrador – Up to $2,000
- Nova Scotia – Up to $3,000 or $6,500 if used for work
- Ontario – Up to $6,600
- Prince Edward Island – Up to $6,500 if needed for occupation
- Quebec – No limit if required for work
- Saskatchewan – No limit if required for occupation
There are varying limits depending on the province that you’re from.
In addition to just your vehicle, you can also exempt certain other items.
For instance, residents of Quebec have no limit on food and fuel, personal clothing and even farm property.
On the contrary, Nova Scotia only allows tools of the trade up to $1,000 to be exempt.
It’s worth checking the official regulations for your province to see what you can exempt.
What happens to my car after claiming bankruptcy?
As shown above, it’s possible to exempt one vehicle when you claim bankruptcy.
But in order to calculate this, there are two main factors you need to consider.
First, how much is your car worth?
It’s not possible to use its original market price or the price that you bought it for.
Instead, you need to have an independent company appraise the vehicle to determine its value.
This needs to be a professional opinion and not one of someone who is related to you or has connections to you.
They need to be willing to put into writing the value of the vehicle and what they believe to be a fair price.
Secondly, is your car paid for?
If it is, then you can often proceed with no problems.
However, if you’re still making payments on your car and another creditor has secured it in the event you can’t make regular payments, it may complicate things and you’ll need to discuss with your trustee on how to proceed.
What if my car is worth more than the province exemption limit?
If your car has been appraised independently but the value is above that of the exemption limit, then there are still ways to ensure that it is not seized when claiming bankruptcy.
For starters, if you own the vehicle and there are no more payments to be made on it, then you can pay the difference to ensure it is exempt from seizure.
For instance, if your car has been appraised and is worth $8,000 but the province limit is $5,000, you can agree to pay the trustee an additional $3,000 to keep the vehicle.
You could also turn this into monthly repayments if you can’t pay this immediately.
If that monthly payment is also too much, then you may be able to speak to your trustee about a consumer proposal.
If the vehicle hasn’t been paid for completely, then you have a number of different options available to you.
This usually involves either keeping or handing back the vehicle depending if it’s leased or financed.
Options will generally depend on the dealer and trustee, so it’s a good idea to try and negotiate terms that work for you.
In most cases, if you’re up to date with your payments and can continue making repayments, you’ll be able to keep the vehicle.
However, if you fail to make future repayments and your lender repossesses your vehicle, bankruptcy laws cannot stop that from happening.
Can I keep multiple vehicles when claiming bankruptcy?
You can only keep one motor vehicle under these exemption rules.
However, if you do own more than one vehicle and want to keep them, you may have better luck with a consumer proposal instead of filing bankruptcy.
This can also be an option for people that have a car that is over the province limit but they don’t have the means to pay the difference and keep it.
If you’d like to learn more about bankruptcy and exemption limits for motor vehicles, don’t hesitate to get in touch with Bankruptcy Canada today for more information.
We’d be happy to help you navigate through your province’s exemption limits and help you understand the process of bankruptcy while keeping your vehicle.
Give us a call today and one of our friendly representatives would be happy to help.
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Bankruptcy FAQs
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What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
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