Can I Keep My Assets? Ontario Bankruptcy Exemptions
What Can I keep if I go bankrupt in Ontario?
While it might sound too good to be true you can keep some of your possessions when you go bankrupt in Ontario, known as the bankruptcy exemptions.
These assets are called bankruptcy exemptions, because they are exempt from seizure by your Licensed Insolvency Trustee.
Ontario Bankruptcy Exempt Assets
The Ontario exemptions apply to the equity in the asset, which is the value of the asset when all liabilities are deducted from the value of the asset. The assets you can keep when going bankrupt in Ontario are:
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.
As you can see you do not lose everything when you file for bankruptcy in Ontario.
In fact, most debtors filing for bankruptcy in Ontario, are able to keep a wide variety of property.
If you would like to speak with a professional about how the Ontario bankruptcy exemptions would impact your situation the best thing for you to do is to schedule a time to review your assets with a licensed Ontario Bankruptcy Trustee.
They will be able to advise you what assets you can keep should you file for bankruptcy.
Why are some assets exempt?
Bankruptcy is a process that allows an honest but unfortunate debtor to get a fresh financial start.
However, to achieve the fresh financial start, you need to keep some dignity and some essential assets as a starting point for you and your family to rebuild your financial lives.
These essential assets are your bankruptcy exemptions, and are defined in the law.
What about my bank account?
Your bank account is not an exempt asset in bankruptcy.
However, you should carefully arrange your banking in bankruptcy, to ensure that no inappropriate payments go to your creditors.
You can keep your dignity, but exemptions are complicated
If you file for bankruptcy, you can keep some assets that are essential for you to live your life, provide for your family, and make a living.
Exactly what you can keep depends on your personal circumstances.
Bankruptcy exemption rules are complicated, and change from time to time. Professional advice is essential.
You could keep all your assets (and avoid the matter of exemptions) by filing a consumer proposal – a negotiated settlement between you and your creditors.
Although this option costs more than a bankruptcy, it may help reduce your feelings of guilt.
For more details on bankruptcy exemptions in Ontario and for answers to your other questions about bankruptcy and consumer proposals, please contact our personal Licensed Insolvency Trustee in your area and arrange for an initial consultation, free of charge.
This federally-licensed professional will examine all the circumstances of your case and advise you on the options available to you.