What Can I Keep In A Bankruptcy In Ontario?

People fear the word “bankruptcy” for many different reasons. Often people worry about the effects a bankruptcy may have on their credit rating, the effect on their family or on co-signors and the societal perceptions. One of the greatest fears people have — is that they may lose everything they own.

This blog is to help you understand what assets are seizable in a bankruptcy and what assets are not in the province of Ontario. In other words, “What can I keep in a bankruptcy in Ontario?”

The Bankruptcy and Insolvency Act was created to allow honest and unfortunate debtors to seek relief from their debts. The purpose of the Act is not to cause hardship. For this reason, many assets are exempt from seizure by your creditors in order to enable you to move forward with your life with a fresh financial start.

There are many different statutes protect people from having their assets seized. Some of these statutes are provincial and others are federal.

Federal legislation is legislation that is enforceable across Canada, while provincial legislation is legislation that is only enforceable in the province to which is applies.

Some of these statues apply generally and protect your assets outside of the context of a bankruptcy, while others only matter if you are filing a bankruptcy.

We’ll start with the most common assets that cannot be seized pursuant to the Execution Act in Ontario. These assets cannot be seized regardless of whether or not you are filing a bankruptcy and are not affected by the filing of a bankruptcy. This is a provincial legislation in Ontario. All provinces have their own similar legislation that protects you from having certain assets seized by a creditor. Make sure you contact your local Licensed Insolvency Trustee to find out what assets are exempt from seizure in your province.

According to the Execution Act in Ontario, the following assets are exempt from seizure:

• All necessary clothing of the debtor or the debtor’s dependents.
• Household Furnishings and Appliances up to a value of $13,150.00.
• Tools and other personal property used to earn income up to a value of $11,300.00.
• For a debtor engaged solely in the tillage of soil or farming, tools and other personal property used to earn income up to a value of $29,100.00.
• One motor vehicle up to a value of $6,600.00.
• The seizure and sale of a person’s principal residence if the equity in the property is $10,000.00 or less is prohibited.

Other assets that cannot be seized can include Retirement Savings. In fact, there are various provincial and federal legislations that protect retirement savings from being seized.

Pursuant to the Bankruptcy and Insolvency Act, RRSPs, RRIFS and DPSPs that were contributed more than 12 months prior to the date of bankruptcy are exempt from seizure. In other words, only contributions made to these plans in the last twelve months might be seizable. However, it is important to note that even those contributions made in the last 12 months prior to filing a bankruptcy may be exempt from seizure if they are held at a life insurance company and the beneficiary is a first line to you (such as parent or child) or if they are locked-in through an employer. For a detailed discussion on these exemptions, please click on the link to read the Blog entitled “What Protection Exists in Ontario for Your Retirement Savings?”

Cash surrender values of life insurance policies are another asset that enjoys exempt status provided that the beneficiary is a first line to you such as a child or parent.

There are many more, less common types of assets that may be exempt pursuant to legislation. For example, the Indian Act provides for exemptions for assets situated on a reserve.

Exempt assets are a complex issue and you should definitely discuss with a Licensed Insolvency Trustee what they may include before making any decisions about how you may want to proceed.