What Can I Keep When Filing Bankruptcy?

“What can I keep when filing bankruptcy? Will a Trustee take away my car and my home?”

You can imagine that we get asked this type of question many times.

What Can I Keep – the General Rule of Assets in Bankruptcy

The general principle of bankruptcy law is that upon filing for bankruptcy, your assets become the legal property of the Licensed Insolvency Trustee. The Trustee is then required to liquidate your assets in an orderly manner and deposit the proceeds into his trust account. The proceeds are then distributed to your creditors after the Trustee pays himself a fee for his professional services.

Exceptions to the General Rule – Exemptions

However, there are a number of very important exceptions to this general rule.

• • Under the Bankruptcy and Insolvency Act, an RRSPs, RRIFs and RDSPs (registered disability savings plans) are exempt from seizure by your Trustee. However, any contributions made to these financial vehicles within the 12-month period prior to the day of bankruptcy would have to be realized by your Trustee. Therefore, he’ll need to examine your account statement to determine if you made any contributions to your account within the 12 months prior to bankruptcy. If this is the case, your Trustee will write to the financial institution holding your account and request a remittance of these funds to his office. The funds are then deposited into his trust account to be held in trust for your creditors.
  • Each province in Canada have laws containing lists of assets that are protected from your creditors, as well as from a Trustee, up to a certain dollar amount. These are called “exemptions”.
  • The list of assets and their dollar exemption limits will vary from province to province. To illustrate, here is a list of exempt assets under the Ontario Executions Act:
    1. Household furnishings and appliances up to $14,180.00
    2. Your equity in your principal residence is exempt IF the equity in your home does not exceed $10,783. If the equity does exceed $10,783 then equity would be subject to realization by the Trustee
    3. All necessary clothing
    4. Tools of the trade up to $14,405.00
    5. A vehicle valued up to $7,117.00
    6. Pensions
    7. Other special exemptions for farmers
    8. Certain life insurance policies

So for example, if you are filing for personal bankruptcy in Ontario, you can keep a vehicle up to $7,117.00 – you wouldn’t have to worry about losing your vehicle to the Trustee so long as its fair market value is beneath that threshold. Your Trustee should be able to look up its value for you.

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