Protecting Your Assets When Facing Bankruptcy

Filing for bankruptcy can seem like an intimidating prospect. Even if you’re deep in debt, you might be worried about what you lose when you declare bankruptcy, such as your house or other assets.

It’s natural to be concerned. Avoiding bankruptcy is preferable, but in dire scenarios, it may be your best option. In this blog, we’ll talk about how you can protect your assets and what you can keep even after filing for bankruptcy in Ottawa

What Assets You Can Keep When Filing for Bankruptcy in Ontario?

When you file for bankruptcy in Ontario, there are some assets that cannot be seized by creditors. These assets are referred to as “exempt assets”, outlined in the Execution Act of Ontario.

The assets outlined in the Act are:

• All clothing for you and your dependents (unlimited value)

• One motor vehicle with a value not exceeding $7,117

• Your household furnishings, equipment, and food up to $14,180

• Any tools and equipment used to earn a living up to $14,405

• Your Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) contributions, except those made in the last 12 months of your bankruptcy filing date

• Equity in your home under $10,783

• For farmers: livestock, fowl, bees, books, tools, and implements with a combined value of up to $31,379

The dollar amounts are evaluated annually and adjusted according to inflation. The above values were updated and set in 2021.

What If the Value of Specific Assets Are above the Exemption Value?

It’s possible that the value of a specific asset, such as your car, will be higher than the exemption value outlined above. You might worry that will mean you’ll have to sell them and hand over the money to your creditors. Ordinarily, the answer is “yes”, but if you agree to pay out the non-exempt portion in cash, you can keep that asset. You should speak to a licensed insolvency trustee for assistance and guidance in this matter.

What About Your Home?

Can you file for bankruptcy and keep your house? That depends on a few different factors.

Your mortgage lender will not foreclose on your home if you file for bankruptcy as long as you have kept up with your mortgage payments. Meanwhile, as long as your equity is under the limit, your home will not be otherwise affected.

Other Exempt Assets

In addition to Ontario law, there are some assets that are exempted under federal law too. The federal exemptions laid out in the Bankruptcy and Insolvency Act (BIA) include:

• Money in an RRSP, DPSP (deferred profit sharing plan), and RRIF account (though payments received from the account are NOT exempt)

• Money in a Locked-in Retirement Account (LIRA)

• Money in a Registered Disability Savings Plan (RDSP) – this also includes payments paid out

• Property that you hold in trust for another person

• CERB, CRB, Child Tax Benefit, and HST payments

• Most pension plans that have life insurance policies

Call D & A MacLeod Company for Bankruptcy Assistance in Ottawa

If you are facing bankruptcy in Ottawa, you can call D & A MacLeod Company for advice and assistance. We have over 70 years of experience helping people in Ottawa find a new beginning. Contact us today to book a consultation.