Ontario Bankruptcy Exemptions – Assets a person can keep in a bankruptcy or a consumer proposal.
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. The vehicle exemption in Ontario is $6,600 (as at December 1, 2015) and in this example the person keeps their automobile because the equity ($6,000) is less than the bankruptcy exemption for a vehicle ($6,600).
Ontario Bankruptcy Exemptions
Clothing No limit.
Household goods $13,150
Tools of trade $11,300
Motor vehicle $6,600
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.