Does Filing for Bankruptcy Mean that I have to Give Up my Stuff?

Even if your financial situation is so overwhelming that you are filing for personal bankruptcy, you will not have to give up all your possessions. Bankruptcies are not intended to be punitive, but are instead the fairest way for the honest debtor deal with their debt and move forward.

If you file for personal bankruptcy you assign all eligible assets to your bankruptcy trustee, who makes arrangements to use their value for your unsecured creditors. But not all of your assets are eligible, “Bankruptcy exemptions” are assets which you allowed to keep.

Some bankruptcy exemptions are part of the federal Bankruptcy and Insolvency Act. These exemptions depend on your own family and financial situation. The exemptions are based on the equity you own in each of your assets.

Secured debts are taken into account when calculating your equity. Secured debts are debts which are backed by collateral, such as mortgages and car loans, where the lender can claim the collateral in the event of defaults.

Bankruptcy exemptions: what you can keep in bankruptcy

The law says you can keep assets which are reasonable for your family’s living expenses, and assets you need for your profession. These assets you keep include:

• payments used for items the law says are necessary for your family’s essential needs (ie special medical expenses)
• property you hold in trust—this does not include property you own
• provincially exempt assets

Provincial exemptions

Other assets you can keep depend on the provincial or territorial laws where you live. These can vary greatly between provinces, and can change over time, so you must consult your bankruptcy trustee for the exemptions which pertain to your case. In Ontario, the assets you can keep include:

• most pensions and some RRSPs
• a car (maximum value of $5650)
• personal effects (maximum value of $5650)
• any tools of your trade (maximum value of $11,300)
• some farm property
• household goods such as: food, furniture, appliances, and heating fuel (maximum value of $11,300)

What you cannot keep in bankruptcy

Your trustee must realize on all non-exempt assets for the benefit of your creditors. He can do this by selling the item either back to you to someone else for its value.