Top Strategies to Make Yourself Creditor Proof in Canada

Top Strategies to Make Yourself Creditor Proof in CanadaIn the ever-changing economic environment, ensuring protection of your assets against creditors becomes a pressing concern. Creditors often face challenges in reclaiming their owed amounts from debtors and resort to legal actions like wage garnishments, bank account freezes, and placing a lien on your home. Hence, it becomes crucial to guard your assets strategically against such instances. In Canada, there are several legal methods to safeguard your financial wellbeing. In this article, we delve into these strategies and guide you towards becoming creditor proof.


Incorporating a Business

One way to safeguard your personal wealth from business liabilities is by forming a legal entity. If you are a sole proprietorship or partnership, incorporation can limit any liability to your personal assets. This ensures that creditors wanting to collect business debts can only access business assets, leaving your personal wealth untouched.

Property Ownership – To Avoid or Not?

A common fear among debtors in Canada is the potential seizure of their homes by creditors. If you’re a debtor, it might be wise to not have any property under your name. Instead, property purchases can be made under the name of your non-debtor spouse or a reliable family member. Another alternative is co-owning assets with a debt-free individual.

Selling Your Property

Creditors are more likely to take legal action if a debtor owns property. If you anticipate difficulties in repaying your creditors, it could be beneficial to put your property up for sale, thereby preserving any accumulated home equity.

The Power of Family Trusts

Family trusts serve as a potent tool to protect your assets while maintaining control over them. By transferring your assets into a trust, you can separate legal ownership from beneficial ownership, making these assets inaccessible to creditors. However, this strategy is only viable if the trust has not been created with intentions to defraud your creditors.

Keeping an Affordable Car

Each province in Canada has its set of bankruptcy exemptions that exclude certain assets from being seized by creditors. Depending upon your province of residence, you may be allowed to keep a vehicle up to a specific value threshold. Hence, driving a more economical car might be a good option.

Homestead Exemption

In certain Canadian provinces like Alberta, Saskatchewan, and Manitoba, the homestead exemption protects a portion of an individual’s primary home from creditors. This exemption can be a relief if you face financial difficulties or file bankruptcy.

Checking Your Exemptions

In Canada, certain funds and assets are exempt from seizure by creditors. These include Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), life insurance policies, annuities, and exempt assets like clothing, household furniture, and trade tools.

Diversifying Your Banking

If you’re struggling with debts, it’s not advisable to conduct all your banking with a single financial institution. Diversifying your banking can help protect your funds from being used to pay off creditors or any overdue credit card debts.

Avoiding Savings or Chequing Accounts

If you owe money to the Canada Revenue Agency, they can seize the money in your bank account for repayment. Hence, if you can manage without a chequing or savings account, it might be a good idea to avoid these.

Spreading Your Debts

Most creditors refrain from taking legal action against individuals who owe relatively small amounts of money. Spreading your debts across multiple creditors can reduce the chances of any one of them pursuing legal action against you.

Wage Garnishment Laws

Every Canadian province, except Ontario, has a law that provides a ‘minimum exception’ from wage garnishments. Depending on your financial situation, a portion or all of your wages might be protected from wage garnishment.

Moving Outside of Canada

Creditors and collection agencies have a poor track record of reclaiming funds from Canadians living outside of Canada. Moving abroad might be a viable strategy if you anticipate difficulties in repaying your creditors.


With these strategies in place, creditor-proofing yourself can become a reality. However, consulting a Licensed Insolvency Trustee is advised to ensure your actions are compliant and effective. At Bankruptcy Canada, our expert Licensed Insolvency Trustees can help you reduce or eliminate your debts entirely by filing a form of debt relief like bankruptcy or a consumer proposal.

Although becoming entirely creditor proof can be challenging, adopting some of the methods above can help protect your assets and ensure your financial wellbeing. Book a free consultation with one of our experts at Bankruptcy Canada. We have been helping Canadians to become creditor proof for over thirty years, and we are here to help you too.

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