What do you lose when you declare bankruptcy?

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In Canada, bankruptcy might mean losing some non-exempt assets like extra cars or investments. For BC, watch if home equity exceeds $12,000, and in Ontario, keep cars under $7,117 in value. Licensed Insolvency Trustees handle these assets, but be cautious in choosing a reliable one. Trustees get paid by the lender and creditor and don’t advocate for Canadians in debt. Beware! Reach out via phone, text, or live chat if you have any questions.

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What You Lose When You Declare Bankruptcy Question

What do you lose when you declare bankruptcy? What assets or belongings might I lose if I declare bankruptcy in Canada?

From: Anonymous Question
Location: Chatham, Ontario (ON)
Category: personal bankruptcy

What You Lose When You Declare Bankruptcy Answer

In Canada, filing for bankruptcy means you might have to part ways with some of your belongings—specifically, the ones not shielded by federal or provincial exemptions. Think of assets like real estate (unfortunately, if the equity tips above provincial limits), investments, those extra cars gathering dust, stashed-away cash beyond the norm, and fancy items. So, for our friends in BC, you’d have to watch out if your home equity crosses $12,000 in certain regions, and your investment accounts that aren’t cozy RRSPs could also be on the line. Meanwhile, folks in Ontario can hold onto vehicles valued at up to $7,117 and household goods capped at $14,180. It’s a Licensed Insolvency Trustee job to help sell these non-exempt assets to settle your debts. Just a heads-up: ensure you pick a trustworthy trustee. It’s like choosing a reliable companion in a financial journey! Trustees get paid by the lenders and creditors and don’t advocate for Canadians in debt. LITs can also double bill you or charge you extra. Reach out via phone, text, or live chat if you have any questions.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

When you declare bankruptcy in Canada, certain assets may be considered for liquidation to pay off your debts. According to the Bankruptcy and Insolvency Act (RSC 1985, c 11), the following assets may be lost:

1. Non-Exempt Property: You may lose any non-exempt property, which includes items such as secondary vehicles, recreational vehicles, and investments beyond allowed thresholds (Section 67).

2. Equity in Your Home: If the equity in your home exceeds the exempt amount, the trustee may sell the home to pay creditors (Section 67).

3. Investment Accounts: Non-exempt investments can be seized by the trustee (Section 67).

4. Luxury Items: Items considered luxury may not qualify as exempt and can be taken by the trustee (Section 67).

5. Cash and Bank Accounts: Any amount over a certain exemption limit may also be seized (Sections 68 and 69).

6. Retirement Savings: While registered retirement accounts are generally exempt, any excess over the prescribed limits identified in regulations may not be protected (Section 67).

Note that specific exemptions can vary by province, and the amounts you can keep are defined under provincial laws and regulations (Canada Bankruptcy and Insolvency Regulations).

For comprehensive details on exemptions, refer to sections related to the exemption of property in the Bankruptcy and Insolvency Act (RSC 1985, c 11, Section 67) and the associated regulations.

From: OSB Helper

Related Questions to Losing Assets In Bankruptcy

Here are the top 5 most frequently asked questions related to what one loses when declaring bankruptcy, based on common concerns and online search trends:

1. What debts are not discharged in bankruptcy?

Debts such as child support, alimony, court-ordered fines or penalties, debts obtained through fraud, and student loans under seven years are not discharged[2][5].

2. Do I lose my assets when I declare bankruptcy?

You may lose non-exempt assets, but certain essential assets like clothing, household furniture, one vehicle (up to a certain value), tools of the trade, and most pensions and RRSPs are protected[2].

3. How does bankruptcy affect my credit score?

Bankruptcy significantly drops your credit score, and the filing remains on your credit report for 6-7 years[3][5].

4. Do I have to surrender my tax refunds when I declare bankruptcy?

Yes, you will lose your tax refund for the year of bankruptcy and any tax refunds for previous years that you have not yet received[2].

5. Can I keep my home and car if I declare bankruptcy?

You can keep your home and car if you continue to make the mortgage and car loan payments, but secured creditors retain their rights to the collateral if you are behind on payments[2].

If you have a question about debt see our debt questions or ask your own debt related question.

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