What Assets Can I Keep in Bankruptcy in BC?

The concept of bankruptcy can often be a daunting one, especially with the fear of losing valuable possessions. If you are considering filing for bankruptcy in British Columbia, it’s important to understand which of your possessions would be protected. This article will delve into the specifics of What assets can I keep in bankruptcy in B.C.?

Introduction

Filing for bankruptcy can appear overwhelming with the possibility of losing one’s belongings. However, it’s not as terrifying as it sounds. In British Columbia, specific laws allow you to keep essential assets even in bankruptcy. These laws aim to offer a financial fresh start while ensuring you have the necessary resources to rebuild your life.

Bankruptcy: An Overview

Bankruptcy is a legal process that provides debtors with a fresh financial start. When you officially declare bankruptcy, you hand over your assets to a licensed insolvency trustee. This trustee then converts those assets into cash and distributes the money among your creditors.

The Role of Exemptions

While the process of bankruptcy involves surrendering your assets, there are certain exceptions. These exceptions, known as exemptions, are assets that you are allowed to keep as they are deemed essential for you and your family’s survival and to rebuild your financial life. The exemptions are defined by law, specifically the Bankruptcy and Insolvency Act.

Exemptions under the Court Order Enforcement Act

In British Columbia, the Court Order Enforcement Act outlines the specifics of what a debtor can keep when filing for bankruptcy. The exemptions are as follows:

  1. Household Furnishings and Appliances: Up to $4,000 worth of household items and appliances are protected.
  2. Motor Vehicle: If the debtor does not owe any maintenance, they can keep a vehicle worth up to $5,000. However, if the debtor owes maintenance, the vehicle value is capped at $2,000.
  3. Tools of Trade: Personal property and tools used by the debtor to earn an income from their occupation are exempt up to $10,000.

Exemptions for Personal Property

The law also provides exemptions for the debtor’s principal residence. The value of the exemption depends on the location of the residence:

  1. Within the Boundaries of the Capital Regional District or the Greater Vancouver Regional District: The exemption value is $12,000.
  2. Outside these Boundaries: The exemption value is $9,000.

These values are based on liquidation, i.e., the amount you would receive today if you sold this personal property.

Exemptions for Pensions and Life Insurance

Pensions are also exempt according to the Pension Act. Registered Retirement Savings Plans (RRSPs) are also protected, with the exception of contributions made in the last 12 months. The cash surrender value of life insurance policies is exempt if a preferred beneficiary is designated.

Understanding the Complications

It’s important to note that the law surrounding exemptions can be complex. The value of exemptions can change over time, and the specifics of what you can keep depend on your personal circumstances and location. Assets pledged to a creditor as security, for example, a car financed by a bank, cannot be claimed as exempt property.

Alternative to Bankruptcy: Consumer Proposal

An alternative to bankruptcy is a consumer proposal, which is a negotiated settlement between you and your creditors. While this option might cost more than bankruptcy, it allows you to keep all your assets and can be a better choice in certain situations.

Seeking Professional Advice

Bankruptcy exemption rules are complicated and subject to change. It’s advisable to seek professional advice to understand your options fully, especially when considering bankruptcy or a consumer proposal. Licensed Insolvency Trustees can assist you with a free assessment of your situation and provide an unbiased opinion on the best course of action.

In conclusion, bankruptcy does not mean losing everything. With the right advice and careful planning, you can navigate this process smoothly and secure a financially stable future. It’s crucial to remember that the primary objective is to provide you with a fresh start, relieving the burden of unmanageable debt while ensuring you retain the necessary assets to start anew.

 

“Bankruptcy is not the end, but a new beginning.”

Note: Always seek advice from a Licensed Insolvency Trustee or a legal professional before making any decisions related to bankruptcy or consumer proposals.

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