Will I loose everything if I file for bankruptcy?

September 30, 2011 by
Filed under: Bankruptcy 

The short answer is no. Not everything. The idea behind bankruptcy (and/or a proposal) is that if you were to liquidate all of your assets, you would still owe more than you can possibly pay back. You are a good person with some bad bad luck, and you deserve a new start. So, if you have any, you will have to liquidate your assets. But not all of them.

You can hang on to a certain amount of assets when you go bankrupt. When you file in British Columbia, you will need to sign a statement that lists your assets and liabilities. If your assets are under a certain amount, or if they are of a certain type, you will not have to surrender them. These include:

  • Any RRSPs (unlimited in value) that you purchased MORE than 12 months ago. Anything purchased within the last 12 months will become payable.
  • Equity in your home in Greater Vancouver and Victoria up to a $12,000 value (in the rest of the province up to a $9,000 value). Note that if your equity exceeds the exemption, you may be required to repay to the full equity in your home. In other words, if your house has $15,000 in equity, you may be required to pay the full $15,000; you may not get the benefit of the exemption. Discuss this with the Trustee as bankruptcy laws can change
  • Household items up to a $4,000 value
  • One vehicle up to a $5,000 value (the vehicle exemption drops to $2,000 if the person is behind on child support payments). Like the home equity item, if the value of your vehicle exceeds the exempted amount, you are not allowed any exemption
  • Work tools up to a $10,000 value
  • Essential clothing and medical aids is unlimited

Under legislation, certain superannuation (pension) plans, retirement savings plans, life insurance policies and court awards for pain and suffering are also exempt. Again a conversation with your trustee is a good idea.

While you can keep some assets, you will have to turn other things over. These items include (but are not limited to):

  • Cash assets such as GICs, term deposits, savings, stocks, bonds, educational savings, etc. must be turned over to the trustee
  • Investments
  • Any RRSP contributions made within the 12 month period prior to your bankruptcy.
  • Personal effects such as jewellery, collectables, recreational equipment, etc.

These and other items of value are not exempt and must be either turned over to the trustee. Again, discuss your options with your Trustee as you may be able to negotiate to purchase these assets from the trustee at liquidation value.

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