Will I lose my car if I declare bankruptcy?

There are many instances where you are able to retain your vehicle despite having filed for bankruptcy.  For example, if you own your vehicle free and clear (i.e. there is no loan securing the vehicle) and it has a relatively modest value, in many instances the Trustee will allow you to buy back the equity in a monthly payment rather than sell it.  In addition, in Manitoba you are eligible for a $3,000 equity exemption for a vehicle provided you are working.  So for example, if the vehicle had a value of approximately $4,000 and you were eligible for a $3,000 equity exemption, you could buy back the remaining equity of $1,000 in a monthly payment and keep the vehicle.  If the vehicle was worth less than $3,000 and you were eligible to claim the exemption, you would simply retain the vehicle and there would be no equity available to the Trustee.

What happens in situations where your vehicle is fully secured to a creditor?  This is quite common in bankruptcy as vehicles often depreciate faster than you can pay off the loan.  The Bankruptcy does not interfere with secured creditors, which means you would continue to make the payments on that particular loan before, during and after the bankruptcy.  It is very unlikely the lender would call in their loan by reason of the bankruptcy.  In fact, there is now a provision in the Bankruptcy and Insolvency Act that prohibits this from occurring provided you are not behind in the payments and have not defaulted on the agreement.

Keep in mind that the equity exemption does not prevent a secured creditor from enforcing their security and repossessing the vehicle if you are behind in the payments. There are exemptions on many kinds of property – home, vehicle, farm equipment and livestock, tools of trade, household goods etc.  The extent to which assets are exempt varies greatly by province.

For more information contact an MNP Trustee in your area.