Filing for bankruptcy can feel overwhelming, but it’s essential for eliminating debt and regaining financial stability. One of the most common concerns when considering bankruptcy is, “Will I lose everything?” The good news is that bankruptcy laws in Canada are designed to protect essential assets, ensuring you can maintain a basic quality of life.
In this article, our trusted advisors discuss what assets cannot be seized in bankruptcy and their dollar exemption amounts in British Columbia (B.C.) so you can feel more confident about your financial future.
What Are Bankruptcy Exemptions?
Bankruptcy exemptions are legal protections that allow you to keep certain assets even if you file for bankruptcy. These exemptions vary from province to province in Canada but are generally aimed at ensuring you retain the necessities of life. From household goods to pensions, these exemptions mean that your trustee cannot seize essential assets for your well-being or livelihood.
Which Assets Are Protected in Bankruptcy?
Personal Belongings and Household Goods
Most provinces allow you to keep essential household items like furniture, appliances, and personal belongings like clothing. The value is determined based on their current market value (not the original purchase price), which is often relatively modest.
For example:
- Household goods: You can typically keep the furniture and appliances necessary for everyday living.
- Clothing: Essential clothing items are always exempt, often with no dollar limit.
Vehicles
If you own it, you can keep a car, provided it falls under the provincial exemption limit. If your car’s value exceeds this limit, you may have to pay the trustee the difference to retain the vehicle. Additionally:
- If your car is financed, and the loan exceeds its market value, you can likely keep it if you continue making loan payments.
- A second or recreational vehicle is usually not exempt unless tied to your livelihood.
Your Home
A common misconception is that filing for bankruptcy automatically means losing your home. The truth is, you may be able to keep it, depending on the equity you have in it. Here’s how it works:
- If the equity in your home is within the provincial exemption limit, you can likely keep it so long as you are able to maintain any mortgage payments.
- If the equity exceeds this limit, your trustee might consider selling it, but only if it would generate a substantial profit after mortgage payments, realtor fees, and other costs. However, there may be options other than selling your home available to realize upon the equity for the benefit of the creditors. A licensed insolvency trustee will review all options available to you.
Tools of Your Trade
Most provinces understand that people must still make a living even after bankruptcy. If you need equipment, tools, or machinery to earn a living, you can keep them if their value is less than the provincial limit.
Pensions, Life Insurance, and RRSPs
Canada’s bankruptcy laws are particularly protective of pensions. Additionally, RRSP contributions (except those made in the 12 months before bankruptcy) are generally exempt from seizure. Life insurance policies may also be protected depending on their type and beneficiaries.
Health and Medical Aids
Assets essential for your health and well-being, such as medical equipment or aids, are fully exempt with no dollar limit. These items remain protected, ensuring uninterrupted access to necessary care.
Farm Property
For individuals involved in agriculture, exemptions often apply to essential farm equipment, animals, and feed required for 12 months of operations.
Indigenous Property
Additionally, assets located on reserves may be exempt under the Indian Act, ensuring the protection of property rights for Indigenous individuals.
British Columbia (B.C.) Bankruptcy Exemptions
| Category | Maximum Amount of Exemption (Realizable Value) |
| Personal Belongings and Household Goods | Up to $4,000 |
| Vehicles | Up to $5,000 (reduced to $2,000 if child/spousal support is owed). |
| Your Home | Up to $12,000 in equity (Metro Vancouver/Capital Region); $9,000 elsewhere. |
| Tools of Your Trade | Up to $10,000 (tools and equipment necessary for income). |
| Pensions, Life Insurance, and RRSPs | Unlimited, with contributions in the past 12 months subject to clawback. |
| Health and Medical Aids | Fully exempt (includes prosthetics, mobility aids, etc.). |
| Farm Property and Indigenous Property | Exempt if necessary for sustenance or community livelihood. |
| Food | Fully exempt (necessary for you and your dependents). |
| Clothing | Fully exempt (all necessary clothing is protected). |
What Assets Are Not Protected in Bankruptcy?
While many essential items are exempt, certain non-essentials and luxury items may not be protected under bankruptcy law. Examples of non-exempt assets include:
- Recreational vehicles, such as boats, trailers, or ATVs.
- RESP contributions, TFSA balances, and non-registered investments.
- Expensive jewelry or luxury goods are not covered under the personal belongings exemption.
If you’re worried your assets may fall into this category, consulting a licensed insolvency trustee is essential. They can help you determine which items are exempt and explore alternatives like consumer proposals, which allow you to retain your assets while repaying your debts through a structured plan.
Crowe MacKay & Company Ltd Can Help
At Crowe MacKay & Company Ltd, we’ve been helping Greater Vancouver, Surrey, and Burnaby residents for over 60 years. Our licensed insolvency trustees provide tailored solutions, including bankruptcy and consumer proposals, to help you effectively handle your debts. Here’s what we offer:
- Individual Solutions like bankruptcy and consumer proposals.
- Business Solutions tailored to companies facing financial challenges.
Require Assistance?
At Crowe MacKay & Company, we have over 60 years of experience and offer free initial consultations. If you have any questions regarding the information above, contact our office today and start your debt relief journey.
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This article has been published for general information. You should always contact your trusted advisor for specific guidance about your individual needs. This publication is not a substitute for obtaining personalized advice.
If you require corporate or personal Insolvency services, Crowe MacKay & Company provides custom solutions for clients, allowing them to live debt-free.