What Can I Keep If I Claim Bankruptcy In B.C.?

Bankruptcy is a process that allows a debtor to get a fresh financial start. When you file for bankruptcy, you surrender your assets to your bankruptcy trustee. The trustee then turns those assets into cash, and distributes the money to your creditors. However, to achieve the fresh financial start, you need to keep some essential assets as a starting point for you and your family to rebuild your financial lives. These essential assets are your bankruptcy exemptions, and are defined in the law.

The Bankruptcy and Insolvency Act recognizes provincial legislation for assets belonging to debtors that are exempt from seizure by creditors. In British Columbia the current Court Order Enforcement Act states:

Exemptions for personal property of a debtor are:

(a) $ 4,000 for household furnishings and appliances;

(b) $ 5.000 for one motor vehicle if the debtor is not a maintenance debtor;

(c) $ 2,000 for one motor vehicle if the debtor is a maintenance debtor;

(d) $10,000 for tools and other personal property of the debtor that are used by the debtor to earn income from the debtor’s occupation.

Exemption for principal residence of a debtor is:

(a) $12,000 if the debtor is a person whose principal residence is located within the boundaries of the Capital Regional District or the Greater Vancouver Regional District;

(b) $9,000 if the debtor is a person whose principal residence is located outside the boundaries of the Capital Regional District or the Greater Vancouver Regional District.

These values are based on a liquidation basis; the amount you would receive today if you sold this personal property.

Pensions are exempt pursuant to the Pension Act and RRSP’s are exempt except for the contributions in the last 12 months.

The cash surrender value of life insurance policies are exempt if there is a designated preferred beneficiary.

The other qualifying factor is that the personal property has not been pledged to a creditor as security.  For example, if the Royal Bank had financed a car and the debt had not been paid, the car cannot be claimed as exempt property because the car has not been paid for in full.

Exemptions Can Be Complicated

In conclusion, if you file for bankruptcy, you can keep some assets that are essential for you to live your life, provide for your family, and make a living. Exactly what you can keep depends on your personal circumstances and the province or territory where you live. Bankruptcy exemption rules are complicated, and change from time to time. Professional advice is important.

You could keep all your assets (and avoid the matter of exemptions) by filing a consumer proposal – a negotiated settlement between you and your creditors. Although this option costs more than a bankruptcy, it may be a better option and one to seek professional advice about.