How to File for Bankruptcy and Keep Your Car

Filing for bankruptcy doesn’t have to mean parting with your valuable assets like your car. You may be wondering “How to file for bankruptcy and keep your car?” This comprehensive guide outlines everything you need to know about protecting your car during bankruptcy and provides practical tips to help navigate this complex financial landscape.

Overview of Bankruptcy

Bankruptcy is a legal process intended to provide relief for individuals or businesses that are unable to repay their outstanding debts. The bankruptcy process begins when the debtor or the creditors file a petition in the bankruptcy court. This process can provide a fresh start for the debtor, but it also comes with certain limitations.

Understanding Personal Bankruptcy

Personal bankruptcy is a process that allows individuals to eliminate their debts or repay them under the protection of the bankruptcy court.

How Bankruptcies Work in Canada

In Canada, bankruptcies are governed by the Bankruptcy and Insolvency Act. This federal statute lays out the rules and procedures for bankruptcies and insolvencies in Canada. It’s important to note that while many of the principles of bankruptcy are similar across different countries, the specific laws and regulations can vary significantly.

The Role of a Consumer Proposal

A consumer proposal is an alternative to bankruptcy in Canada. It’s a legally binding process that is administered by a Licensed Insolvency Trustee (LIT). In a consumer proposal, you make an agreement with your creditors to pay back a percentage of what you owe them or extend the time you have to pay off your debts, or both.

How to Retain Your Car During Bankruptcy

Many people who file for bankruptcy are concerned about losing their assets, particularly their cars. However, it’s not always the case that you’ll have to give up your car when you file for bankruptcy.

Ownership Status

Whether you can keep your car during bankruptcy largely depends on the ownership status of the vehicle. If you own your car outright and its value is below the exemption limit set by your province, you can keep your car. If you are still making payments on your car loan or lease, the situation becomes more complicated.

Leased or Financed Cars

If you lease your car or are making payments on a car loan, you may be able to keep your car during bankruptcy. However, you must be able to continue making your payments. If you can’t afford your payments, you may need to consider surrendering your car.

Exemption Limit

Each province in Canada has its own exemption limit for motor vehicles in a bankruptcy. If your car’s value is below this limit, you can keep your car during bankruptcy. If your car is worth more than the exemption limit, you may need to pay the trustee the difference in value.

Navigating Your Bankruptcy with a Licensed Insolvency Trustee

A Licensed Insolvency Trustee (LIT) can guide you through the bankruptcy process, answer your questions, and provide expert advice tailored to your unique situation. They can also help you explore alternatives to bankruptcy, such as consumer proposals.


Filing for bankruptcy is a significant decision that can have long-term financial and legal implications. Before making this decision, it’s important to understand the process, the potential outcomes, and the steps you can take to protect your assets, including your car. By working with a Licensed Insolvency Trustee and understanding your rights and obligations under the Bankruptcy and Insolvency Act, you can navigate the process more confidently and effectively.

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