What Are Exempt Assets In BC?

Understanding Protected Assets in British Columbia

Going bankrupt can be a terrifying prospect. Many individuals are overwhelmed by the fear of losing all their possessions. However, this is not necessarily the case. When you declare bankruptcy, some of your assets are safeguarded from seizure by creditors. These assets are classified as ‘exempt,’ implying that you are permitted to retain them.

Every province has its own set of exemption laws. In British Columbia, the relevant statute is the Court Order Enforcement Act and Regulations (COEA).

The Rundown of Exempt Assets in British Columbia

Here are the amounts of equity you can safeguard as exempt assets in British Columbia (per individual):

 

  • Attire
  • Medical aids
  • Household furniture and appliances – $4,000 (based on the quick-sale price, not retail or replacement cost)
  • Motor vehicle – $5,000 equity in one motor vehicle (this is reduced to $2,000 if you owe money for child or spousal support) It’s the equity you have in the vehicle that counts, not the value of the vehicle. You can’t transfer any unused exemption room to a second vehicle.
  • Principal residence – $9,000 (this increases to $12,000 if your residence is in the Capital Regional District or the Greater Vancouver area).
  • Tools of the trade – $10,000 (tools that you need to earn income). A second vehicle may be considered a tool of the trade, but not all vehicles fall under this exemption.
  • Life Insurance Policy Cash Surrender Value (CSV) when the named beneficiary is a preferred beneficiary (parent, spouse, child or grandchild).
  • Registered Pension Plans (RPP) except for over-contributions.
  • Locked-In Registered Retirement Savings Plans (RRSP).
  • Registered Retirement Savings Plans (RRSP) that are invested in a segregated fund with a life insurance company.
  • Registered Retirement Savings Plans (RRSP) contributions made more than one year before the bankruptcy date (or the initial bankruptcy event) calculated on a first-in first-out basis.
  • Deferred Profit Sharing Plans (DPSP) contributions made more than one year before the bankruptcy date (or the initial bankruptcy event) calculated on a first-in first-out basis.

 

Determining the Equity in an Asset

1. Begin by identifying the fair market value of the asset (how much would it sell for if you sold it right now?).

2. Is the asset security for a loan or a mortgage? If so, what is the loan amount?

3. Deduct the loan amount from the asset’s value. This is referred to as the ‘gross equity’.

4. Divide the gross equity by the number of owners – this gives you your share of the gross equity in the asset.

5. Now subtract the applicable exemption amount from the gross equity. The result is the equity available to your creditors.

Instances Where The Asset Equity Exceeds the Protected Amount

If you desire to retain the asset, here are a few options you have:

1. Make a lump-sum payment to the Trustee equivalent to the equity available to your creditors.

2. If monthly payments are feasible, discuss a payment agreement with the Trustee until you’ve repaid an amount equal to the equity available to your creditors.

3. Have a family member make a lump-sum payment equal to the equity available to your creditors.

4. Have a family member purchase the asset from you and remit the equity to the Trustee.

If you don’t want to keep the asset or you can’t afford to pay to keep the asset:

1. The Trustee may request that you deliver the asset to their office or to another location for the asset to be sold.

2. The Trustee may arrange for a third party to pick up the asset.

3. You will receive funds from the sale of the asset after the asset

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