Not All Is Lost With A Bankruptcy

With a stagnant economy and unemployment continuing to take its toll on several provinces, thousands of households or Canadian households are finding themselves struggling to keep up with an ever-increasing cost-of-living as debt continues to compound. It’s important to note this. Because if this sounds familiar, it’s important to know you’re not alone.

If debt has become unmanageable and you have started to investigate your options, congratulations are in order. While this might not seem like a celebratory time — taking control of your finances and seeking help is a courageous first step towards a stronger financial future. And that’s something worth celebrating.

Considering Bankruptcy

For some, bankruptcy is the most viable option to achieving a fresh start. When considering bankruptcy, many are concerned they will have to relinquish everything they own, which could be devastating and have a significant impact. This is not at all the case.

Bankruptcy is a process that allows an honest but unfortunate debtor to get a fresh financial start. In order to achieve that fresh start, you are going to need essential assets in order to begin the rebuilding process. These essential assets are exempt from bankruptcies and are defined by provincial and federal law.

General Exemptions

When an individual files for bankruptcy, the licensed Insolvency Trustee (LIT) has the obligation to take possession of all of the assets of the debtor over and above those exempt under provincial or territorial law. All (but the exempt) assets are then turned into cash and distributed to your creditors. Exempt assets may include household possessions (such as household furnishings to the extent of $7,000 in Quebec, medical aids, personal items and tools or equipment required for the purpose of earning a living. Other assets which may be retained by the debtor consist of:

1. RRSPs with the exception of any contributions made by the debtor within the (12) month period preceding the bankruptcy.
2. Cash surrender value of a life insurance policy provided the beneficiary is a married spouse or direct descendent or ascendant of the debtor.
3. A vehicle provided it is used for work or required for the well-being of the debtor and his family.
4. Although they are not exempt, most debtors can keep their property (house or condo) provided that there is no equity or that an acceptable agreement can be reached with the trustee if there is a reasonably small equity.

 Bankruptcy in Quebec

Because I am based out of our Montreal office, I think it would be helpful to Quebec residents to speak directly to some of the items which may be exempt from a bankruptcy within the province. These include:

1. Food and fuel: no dollar limit.
2. Clothing: no dollar limit.
3. Household furniture and appliances: specific types, up to $7,000.
4. Motor vehicle: no dollar limit.
5. Disability aids, accident benefits: no dollar limit.
6. Tools of your trade: no dollar limit.
7. Farm property: no dollar limit.
8. Principal residence with negligible equity.
9. Support received through court order, donation, or bequest.
10. Most property declared exempt by a donor or will.
11. A certain portion of your wages and salaries, based on the number of your dependents.
12. Benefits payable and employer contributions under an employer-sponsored pension plan.
13. Family papers and portraits, medals and other decorations, and documents.
14. Items used in religious worship.
15. Income for services as a minister of religion.
16. Food, lodging, and transportation passes received for employment travel.

There are also additional and more complex exemptions available to Quebec residents. The rules on personal bankruptcy in Quebec are contained in Quebec’s Civil Code and they significantly differ from the regulations found in other provincial bankruptcy laws in Canada. As a result, it is important that before you finalize your decision to file for personal bankruptcy in Quebec you consult with a Licensed Insolvency Trustees in Quebec as they will have the most in-depth insights on Quebec bankruptcy law.

For more information about whether bankruptcy might be the best route for you and your unique financial situation or what other options may be available, contact your local MNP Licensed Insolvency Trustee for a free, no-obligation consultation. Working together with you, we can help you get back on track and working towards the future you imagine for yourself and your household.