Ontario Bankruptcy Exemptions

Ontario bankruptcy exemptions refer to the equity in the assets you own that can be kept if you decide to declare bankruptcy or file a consumer proposal with your creditors. Here is an example of how the exemptions work for a motor vehicle: A person who owns a car worth $13,000 has a loan against it in the amount of $7,000. This means that the individual has $6,000 of equity in the automobile.   For individuals, the following are exempt from forced seizure in a bankruptcy:

1. All necessary clothing for you and your dependents with no dollar limit
2. Household furnishing and appliances up to $14,180
3. Tools and property used to earn a living to a maximum of $14,405
4. One motor vehicle not exceeding a value of $7,117
5. Equity in your home if that amount is less than $10,783
6. RRSP and RRIF savings, except contributions made within the last 12 months

These exemptions refer to the equity in the asset. Equity is the value of the property you own when weighed against any debts, encumbrances, or loans against the property. Exemptions are in effect for all registered retirement savings plans (RRSP’s, RRIF’s and DPSP’s (Deferred Profit Sharing Plans). Contributions made in the 12 months prior to the date of bankruptcy will be recovered (clawed back) for the benefit of the bankruptcy estate. You will have noted that RRSPs are exempt from seizure. Some people cash in their RRSPs to pay down their debts. This is usually a bad idea because RRSPs are to provide for your retirement. Law makers have recognized this and do not expect people to use their RRSPs for debt repayment, otherwise they would not have passed laws to make them exempt. You will also have noted that there is a $10,000 exemption for a home effective on December 1, 2015. If you have equity in a home greater than $10,000 a consumer proposal may allow you to keep the home and pay only a portion to what you owe. Consumer proposals are used very frequently in Ontario. Filing bankruptcy can help you become debt free, although it is important to understand how it will impact your savings and other assets. When going bankrupt you will want to know if you can keep your personal property, cars, home, household furniture and appliances and savings and bank accounts. The execution act in Ontario distinguishes between personal property and farm property.