What do I get to keep in a bankruptcy?

Taking the step to officially file for bankruptcy can be intimidating, like stepping into a great unknown. The uncertainty of what comes next, the added complexity to your financial life, and the stress and anxiety that go with it, can be a lot to take.

In Canada, filing for bankruptcy means you’ve already approached and spoken to a Licensed Insolvency Trustee (LIT) — A trained professional who can answer your questions, deal with creditors on your behalf, and help put your mind at ease.

One of the questions our LIT’s get most frequently when clients are considering bankruptcy is: Which of my assets and possessions will I get to keep if I file? Which assets will I need to give up?

Canadian Bankruptcy Exemptions

In a bankruptcy your Trustee will be tasked with liquidating some of your assets for the benefit of your creditors. But you won’t lose everything; each province in Canada dictates which assets you can keep in a bankruptcy. These assets are called “exempt” because they’re excluded from the assets that would be sold.

For a full list of exemptions by province, please refer to this helpful guide.

Below are some examples of assets that all Canadian provinces, to varying degrees, allow you to keep as a bankrupt individual:

• Pension and retirement savings
• Clothing and personal effects
• Medical and heath aids
• Trade tools or items required for work (up to a certain limit)

Big ticket items, like vehicles and homes, have various conditions attached to them that vary widely by province. For example, whether or not your vehicle goes to your trustee may depend on if it’s needed for work. The amount of equity in your house you’re allowed to keep will vary by province and will depend on if the home is considered your “principal residence” or not.

Other assets that may not be fully exempt, or have no exemption at all, can include:

• Investment properties
• Second vehicles
• Alternative assets (collectibles, art)
• Surplus income*

*The rules surrounding surplus income can be complex, but the general principle in bankruptcy is that you need to report any salary increases or other financial windfalls to your Trustee. You will likely be able to pocket some of it, up to a certain pre-determined limit, but the rest will go to your creditors at the discretion of your Trustee. For a full understanding of the rules of Surplus Income, click here.

Be sure to consult your own province’s list of exemptions and talk with your Trustee before deciding if bankruptcy is right for you.

MNP can help

The LIT’s at MNP Debt are among the most experienced and qualified in Canada and are accessible wherever you are in the country. If your debt situation is forcing you to consider bankruptcy or another debt relief alternative, we’ll help ensure the path you take is the right one. Your initial consultation is free of charge and free of judgment.