Bankruptcy may seem like a daunting process, but it’s not as frightening as it appears. One of the most common concerns is the fear of losing all assets. However, the truth is, even during bankruptcy, you can still retain some of your belongings. Let’s delve into understanding what assets you can keep during bankruptcy.
Understanding Bankruptcy
Before we proceed, it’s important to understand what bankruptcy is. Simply put, it’s a legal process that provides relief to individuals or businesses who are unable to pay their debts. It allows them to start afresh financially, while ensuring fair treatment to their creditors.
Can You Keep Your Assets in Bankruptcy?
A common misconception about bankruptcy is that you lose everything you own. This is not true. In fact, you can keep certain assets, depending on the laws of your province or territory.
Assets You Can Retain Across All Provinces and Territories
Certain assets are generally exempt from seizure during bankruptcy across all provinces and territories. These include:
- Registered retirement savings plans (RRSPs), excluding contributions made within the 12 months prior to declaring bankruptcy.
- Cash surrender value of life insurance policies, provided the beneficiary is a spouse, child, parent, or grandchild.
- Pension plans, in most cases.
To gain more clarity on what assets you can retain during bankruptcy, you can book a free consultation with a Licensed Insolvency Trustee.
What Happens to Your Income During Bankruptcy?
Your income isn’t entirely untouched during bankruptcy. A portion of your take-home pay may be payable to the Licensed Insolvency Trustee for the benefit of all creditors. Factors influencing this amount include:
- The take-home pay of your family unit.
- The number of people in your family.
- Non-discretionary expenses like child care or child support.
Can You Keep Your Car During Bankruptcy?
Whether you can keep your vehicle or not depends on whether you can continue making loan payments during your bankruptcy. If you can, then you may be able to keep your vehicle. However, your bankruptcy won’t prevent your car from being repossessed if you’re unable to make payments.
Can You Keep Your House During Bankruptcy?
Just like your car, if you can continue making your mortgage payments, you may be able to keep your home. But this also depends on whether your home equity falls within the exemption limits of your province.
Retaining Assets in Different Provinces During Bankruptcy
The assets you can keep in bankruptcy vary by province. Let’s take a look at what you can keep in some of the provinces.
Alberta
In Alberta, the Civil Enforcement Act determines what you can keep during bankruptcy. This includes food for the next 12 months, necessary clothing up to $4,000, household furnishings and appliances up to $4,000, one motor vehicle not exceeding $5,000 (equity), medical and dental aids, and more.
British Columbia
In British Columbia, you can keep equity in a home in Greater Vancouver and Victoria up to $12,000. In the rest of the province, it’s $9,000. You can also keep equity in household items and a vehicle up to certain values.
Saskatchewan
In Saskatchewan, the primary asset you can keep is your Registered Retirement Savings Plans (RRSPs), excluding contributions made within the 12 months prior to declaring bankruptcy.
Manitoba
In Manitoba, you can keep furniture, household furnishings, and appliances not exceeding $4,500 in total value, necessary clothing, and more.
Ontario
In Ontario, you can keep your principal residence if it has less than $10,000 of equity in it, clothing and personal effects up to $5,650.00, household furniture and appliances up to $13,150.00, motor vehicle up to $6,600.00, and tools of the trade up to $11,300.00.
Quebec
In Quebec, you can keep all necessary household goods, necessary and ordinary clothing and personal effects, and more.
New Brunswick
In New Brunswick, you can keep necessary household goods, necessary and ordinary clothing, necessary fuel and food, one motor vehicle suitable for highway use, and tools and equipment used in your profession or occupation.
Newfoundland and Labrador
In Newfoundland and Labrador, you can keep food required by you and your dependents for the next 12 months, necessary and ordinary clothing of you and your dependents, a motor vehicle of you not exceeding $2,000 in value if not required for work, and more.
Nova Scotia
In Nova Scotia, you can keep reasonably necessary wearing apparel, household furnishings and furniture, necessary fuel and food, one motor vehicle not exceeding $6,500 in value, necessary medical and dental aids, and more.
Prince Edward Island
In Prince Edward Island, you can keep the necessary and ordinary clothing of the debtor and their family, any motor vehicle owned by the debtor not exceeding $3,000 in value if not required for employment, and $6,500 if required to retain employment or for transportation to a place of employment where public transportation facilities are not reasonably available, and more.
Northwest Territories
In Northwest Territories, you can keep household goods not exceeding $5,000 in value, necessary and ordinary clothing and personal effects of the debtor and the family of the debtor, food, fuel and other necessaries of life required by the debtor and the family of the debtor for the next 12 months, tools of the trade not exceeding $12,000 in value and tools used for hunting not exceeding $15,000 in value, and more.
Nunavut
In Nunavut, you can keep all necessary household goods, necessary and ordinary clothing and personal effects, food, fuel and other necessaries of life required by the debtor and the family of the debtor for the next 12 months, necessary tools of the trade, and more.
Yukon
In Yukon, you can keep household goods not exceeding $200 in value, necessary and ordinary clothing and personal effects of the debtor and the family of the debtor not exceeding $4,000 in value, food, fuel and other necessaries of life required by the debtor and the family of the debtor for the next 12 months, tools of the trade not exceeding $600, including livestock, and more.
Conclusion
Bankruptcy doesn’t mean you’ll lose everything. Depending on the province or territory you reside in, you may be able to keep certain assets. Always consult with a Licensed Insolvency Trustee to understand your rights and options.
