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Oftentimes, when people hear the word “bankruptcy”, they come to the immediate conclusion that they will lose everything they own. Although this is widely believed, this is a major misconception and we will clarify the terms of bankruptcy below.

There are specific limitations called “personal bankruptcy exemptions”, which allow you to hold on to a certain amount of personal possessions when filing for bankruptcy. Of course, the specifics of these limitations vary from province to province.

According to the Bankruptcy Ontario website:

In Ontario, the bankruptcy exemptions (what you are allowed to keep) include (effective Dec 1, 2015):

All necessary clothing;

One motor vehicle worth up to $6,600 (car, truck, etc.);

$13,150 worth of household furnishings and appliances;

$11,300 worth of tools of the trade (equipment that you use to earn a living);

Certain types of life insurance;

All RRSP, RRIF and SPSP (Deferred Profit Sharing Plan) savings except contributions made in the 12 months before your bankruptcy.

When it comes to the bigger ticket items, such as your living accommodations (house, condo, etc.), these stipulations become more complicated. Again, according to Bankruptcy Ontario:

Whether or not you will lose your house depends on the value of your house, and the amount owing on your mortgage. Most people that declare bankruptcy in Ontario and own a house will have a mortgage on the house.

The Ontario Execution Act stipulates that your principal residence is exempt from seizure IF the equity in your home does not exceed $10,000. If the equity does exceed $10,000 then your principal residence is subject to seizure and sale.

In that case you are required to pay the equity in your house if you go bankrupt. (Equity is the difference between the value of the house and the amount owing on the mortgage).

These rules are complex and they are not clear-cut in nature. Therefore, it is important to sit down with a licensed insolvency trustee to get more information on these important matters.

Our team has extensive experience in addressing these issues so feel free to email info@dodicklandau.ca or call us at 416 736 4357 (HELP) to book a free, no obligation consultation with one of our debt solutions’ experts. Make an appointment today, specifically tailored to your situation. We look forward to assisting.