Actully You can keep some of your possessions when you file for bankruptcy. These assets are called bankruptcy exemptions, because they are exempt from seizure by your bankruptcy trustee.
For most people who go bankrupt, the most important exemptions are limited amounts of:
- Food and heating fuel.
- Health aids.
- Clothing.
- Furniture.
- Your Car
- Your House
- The tools of your trade.
- Farm land, animals, equipment, and supplies.
- Pensions or retirement savings
The limits on the value of these exemptions are set by the provinces and territories. For a house, the limits are severe enough that most bankrupts must sell their houses to pay the excess value to their creditors.
An item such as a car would need an appraisal to confirm its value.
What if there is a mortgage on my house or car?
The exemption applies to the equity you hold. When there is a secured debt against your asset, the equity is the value of the asset after your unpaid debt amount is deducted.
The exemption applies to the equity you hold. When there is a secured debt against your asset, the equity is the value of the asset after your unpaid debt amount is deducted.
For example, if you live in Alberta and have a car worth $15,000 and there is a secured loan against it with $11,000 owing, your equity in the car is $4,000. In Alberta, the exemption for a car is $5,000, so your car is exempted from your bankruptcy, your unsecured creditors can not take it, and you can keep it.
However, even if your payments are up-to-date, the secured creditor might repossess your car if you go bankrupt. This varies with the current policy of the creditor. It is essential that you get advice from a bankruptcy trustee to avoid losing your car or House if it is possible.
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