When you’re considering bankruptcy to solve your debt problems, one of your biggest concerns might be whether you will lose some of your assets, especially your house. We understand that this is an unsettling thought; you might have heard somewhere that you’ll ‘lose everything’ if you file for bankruptcy. Fortunately, this is not the case, but there are some rules you will need to know.
In Ontario, bankruptcy law has exemptions to allow you to retain assets such as clothing, tools, cars and furniture. While you may have to part with some of your assets in order to pay back some of your debt to your creditors, your assets are protected up to a certain amount. And some of those amounts were increased for Ontario at the end of 2015. You can keep up to the following amounts for these items:
Clothing: NO LIMIT. One of the biggest changes that took effect in 2015 is that you can now keep all of your clothes when you file for bankruptcy.
Furniture, utensils and food: $13,150 limit. You can keep any furniture, utensils and food up to a limit of $13,150.
Tools of trade: $11,300. Any tools that you use to do your job are protected up to a limit of $11,300.
Automobiles: $6,600. What happens here is that your car will be appraised by an expert who can tell you how much it’s worth. If your car is worth less than $6,600 and you do not owe any money on your car to a creditor, then you would be able to keep it.
Farm livestock and machinery: $29,100. If you own a farm and file for bankruptcy, your farm-related assets will be protected up to this amount.
These exemption amounts were current as of December 1, 2015, but our debt experts can advise you if there are any other recent updates and will be able to answer any questions about what you can keep during the bankruptcy process.
We understand that for many homeowners, their house is their greatest asset and the source of many memories. Not only is it possibly the most valuable, in terms of dollars, but the emotional attachment you have to your home is priceless. The good news is that you don’t automatically lose your home during the bankruptcy process. However, there are some important factors to consider. First, we’ll help you figure out how much equity you have in your home. Then, depending on how much equity you do, or do not have, we will be able to advise you what impact a bankruptcy would have on your ability to stay in your home.
It matters because the amount of equity you have in your home will determine whether you will be able to keep your home. What is home equity? Home equity is your share of the value of your home—what your home is worth on the market minus what you owe on it. We can help you determine the market value of your home (we’ll look at real estate listings for homes similar to yours), then subtract the amount you still owe on your mortgage, as well as any property taxes you owe.
If you’re worried about keeping your home when you file for bankruptcy, a new change in Ontario might be able to help you. Until December 2015, Ontario did not offer any exemptions for homeowners who file for bankruptcy. But now you can keep up to $10,000 of the equity in your home.
For example, if the market value of your home is $150,000 and you owe $130,000 on your mortgage, as well as $600 in property taxes, your home equity would be $19,400 (or $150,000 – $130,000 – $600). In order to keep your home, you would pay $9,400 to your Trustee as part of the bankruptcy process.
Bankruptcy might not be the best debt solution for people who have paid off a good chunk of their mortgage and have a lot of home equity. You might want to consider other debt relief options, such as a consumer proposal, instead. This is why our debt experts will discuss every one of these with you before looking at a bankruptcy.
We hope that this page helped to answer two of the biggest questions about bankruptcy. There are a great many myths about bankruptcy, so we want to help you get the facts and see how a bankruptcy would impact your family—if it is even needed in your situation. If you have any more questions, you may review our Bankruptcy FAQ page or request a call to speak with a debt help professional.