What do you get to keep and what happens afterwards?

Don’t think for a minute that you will lose everything when you declare bankruptcy. Whatever happens, you get to keep the essentials.

Every month you will be required to pay a certain sum in accordance with your income and with the assets you wish to keep. This amount is determined so that you can continue to maintain a reasonable standard of living.

You get to keep:

  • All necessary furniture in your principal residence.
  • All necessary food and clothing.
  • Instruments and tools required for your work.
  • Compensation received for physical injuries.
  • Employer-funded pensions.
  • Assets inside Registered Retirement Savings Plans  (RRSP), except contributions made within the last 12 months before the date of bankruptcy.
  • Assets held in Registered Retirement Income Funds (RRIF).
  • Funds in Locked-in Retirement Accounts (LIRA).
  • Homes, cottages and land, if their market value does not exceed the amounts owing on them, such as mortgages and taxes, and if payments are up to date.
  • Automobiles and recreational vehicles (ATV, snowmobile, motorcycle, etc.) financed or leased, if the payments are up to date and their market value does not exceed the amount due creditors.

In Ontario:

You get a $5,650 exemption for your vehicle if it is not financed. If its market value exceeds this amount, you need to pay the difference to the Licensed Insolvency Trustee during bankruptcy.

In New Brunswick:

You get an exemption of up to $6,500 on your vehicle if it is not financed and you need it for work or to travel to work if a means of public transit is not reasonably available. If the market value exceeds this amount you need to pay the difference to the Licensed Insolvency Trustee during bankruptcy.

What assets need to be remitted to the trustee?

It’s not easy to part with your belongings. That’s why your Licensed Insolvency Trustee will help you get through this step with dignity. Afterwards, you can make a fresh start with complete peace of mind.

You will have to remit the following to your Licensed Insolvency Trustee:

  • The surrender and loan values of any life insurance policies, in certain cases.
  • Personal items of exceptional value with no immediate use to the family (works of art, pianos, antiques, etc.). Compensating your Licensed Insolvency Trustee will let you keep these items.
  • Tax refunds from past years and from the year of bankruptcy.
  • Automobiles and recreational vehicles (ATV, snowmobile, motorcycle, etc.) where the market value does not exceed the amount due guaranteed creditors. You can keep these items if the trustee receives compensation equal to their net value.  This amount will be determined at your first meeting and the payment will be staggered over several months.
  • Homes, cottages and land where the market value exceeds the sums due for mortgages and taxes. If you are behind on your mortgage, you may have to turn these items over to the creditors. If ever your Licensed Insolvency Trustee needs to return your home to your mortgage lender or sell it, he or she will first come to an agreement with you regarding the time you need to leave the premises.
  • Any contributions to an RRSP made during the 12 months prior to the date of bankruptcy.
  • The portion of any Registered Education Savings Plan (RESP) representing your contributions.
  • TSFAs and investments outside an RRSP (GICs, stocks, bonds, mutual funds, etc.).

What happens next?

If you have no surplus income*, you will be freed of all debts after 9 months (first bankruptcy) or 24 months (second bankruptcy).

If you have surplus income*, you will be freed of all debts after 21 months (first bankruptcy) or 36 months (second bankruptcy).

*Surplus income is the amount remaining after subtracting your expenses from your net income. These expenses are determined according to the norms established by the Superintendent of Bankruptcy. This calculation is adjusted in accordance with the number of people in the household. The income threshold required to live on is established each year by the Superintendent of Bankruptcy. For more information you can consult www.osb-bsf.ic.gc.ca.

Afterwards you have the opportunity to rebuild your credit. Watch the video that explains how.