What can they take during bankruptcies?

Navigating the complexities of bankruptcy laws can be challenging, especially when it comes to understanding what assets you can keep. This article aims to demystify the process by highlighting the types of assets that are generally protected and those that may be at risk during a bankruptcy filing.

What assets can I keep in bankruptcy?

When you declare bankruptcy, there is often a concern about losing valuable assets. However, certain items are protected under bankruptcy exemptions. These exemptions allow you to retain essentials such as clothing, household furniture, and tools needed for your employment. Additionally, many provinces in Canada have laws in place to protect a portion of the equity in your home, vehicle, and certain types of savings like RRSPs.

Each province has its own set of rules, so it's essential to consult with a licensed insolvency trustee to navigate your specific situation. This professional can provide guidance on how to maximize your exemptions and retain as much property as possible.

For instance, in Ontario, you may keep up to $10,000 worth of household items and up to a certain value in vehicle equity. Provinces like Alberta and British Columbia have different thresholds for these exemptions.

What assets can creditors take during bankruptcies?

Assets that may be vulnerable during bankruptcy include property not covered by exemptions, such as second homes, recreational vehicles, or investments that don't fall under the protected category of pensions or retirement savings plans. Creditors can claim these items to satisfy outstanding debts.

It's important to understand that certain assets might only be partially exempt. This means that if the value of an asset exceeds the exemption limit, the trustee can seize the exceeding amount.

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For example, if you have significant equity in your home that goes beyond the provincial exemption limit, that excess equity could be accessible to creditors. Similarly, if you own a luxury vehicle with high value, you may need to trade it in for a more modest model to fall within the exemption limit.

Can I keep my house if I declare bankruptcy?

Keeping your house during bankruptcy is possible, but it hinges on whether you can continue to make mortgage payments and if the equity in your home is within your province's exemption limit. If you can't make payments, or if your equity is substantial, the trustee may sell your home to pay creditors.

For example, in Saskatchewan, homeowners can protect up to a certain amount of equity. If your equity surpasses this amount, you might have to arrange a payment plan with the trustee to keep your home.

It's crucial to review your mortgage agreement and speak with a licensed insolvency trustee to understand your options fully. They can assist in making an informed decision on whether it is feasible to retain your home or whether selling it and downsizing is a more practical choice.

Can I keep my car if I declare bankruptcy?

Similar to your home, whether you can keep your car depends on the amount of equity in the vehicle and your ability to maintain loan or lease payments. Each province has an exemption limit for vehicles, which often allows for the retention of a basic vehicle needed for work or family transportation.

If your vehicle's worth exceeds the provincial exemption, you might be required to pay the excess amount to your creditors through the trustee. Otherwise, you may need to consider selling the vehicle and purchasing a less expensive one to fit within the exemption limit.

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Understanding the specifics of your province's exemption for vehicles is key. For instance, in British Columbia, the exemption for a vehicle is different if you live in Greater Vancouver or Victoria compared to the rest of the province.

How do bankruptcy exemptions vary by province?

The exemptions for bankruptcy are not uniform across Canada; they vary significantly from one province to another. While some provinces allow you to protect a substantial portion of your home equity, others offer minimal protection.

In addition to the general categories of exemptions like personal items and tools of trade, certain provinces have unique exemptions. For example, farmers in some regions may be allowed to keep a higher value of farm-related assets.

Each province also provides distinct exemptions for pensions and retirement savings. In recent years, changes in the Bankruptcy and Insolvency Act have made it possible to protect certain pension plans, RRSPs, and RESPs across the country.

What happens to my income if I file for bankruptcy?

When filing for bankruptcy, your income will be assessed to determine if you are required to make surplus income payments. These payments are contributions you may need to make, over and above your basic living expenses, if your income exceeds a certain threshold set by the government.

The surplus income calculation takes into account your family size and necessary living costs. If applicable, these payments are distributed among creditors as part of the bankruptcy process.

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It's essential to keep in mind that regular income from employment is generally not taken away during bankruptcy. However, any windfalls such as inheritances or lottery winnings received while you are bankrupt may be claimed by the trustee to pay your creditors.

FAQ

What gets taken away from bankruptcies?

In bankruptcy, assets that are not protected by provincial or federal exemptions can be taken away to repay creditors. This typically includes any non-essential property like secondary real estate, investments, and luxury items.

To better understand what may be at risk, discussing your assets with a licensed insolvency trustee is advisable, as they can provide a detailed rundown based on your province's specific exemptions.

What cannot be wiped out by bankruptcies?

Certain debts like court-imposed fines, alimony and child support payments, and student loans (if it has been less than seven years since you left school) cannot be wiped out by bankruptcy. Moreover, secured debts, such as a mortgage or car loan, won't be eliminated unless you surrender the assets securing those debts.

Understanding the types of debts that are not discharged in bankruptcy can help you plan for your financial future post-bankruptcy more accurately.

What gets cleared in bankruptcies?

Bankruptcy can clear most unsecured debts, such as credit card balances, unsecured personal loans, and medical bills. Upon successful discharge from bankruptcy, these debts are forgiven, and you are no longer responsible for repaying them.

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Keep in mind that while bankruptcy can provide relief from certain debts, it should be approached as a last resort due to its long-term impact on your credit score and financial standing.

In conclusion, understanding What can they take during bankruptcies? is crucial when considering this legal avenue to address financial difficulties. Provincial exemptions play a significant role in protecting certain assets, and consulting with a knowledgeable licensed insolvency trustee can help ensure that you make the most of these protections. Remember that bankruptcy laws are designed to offer a fresh start while also being fair to creditors, so knowing your rights and responsibilities is essential for navigating this complex process.