Canada Bankruptcy Exemption Law vs. Myths

Posted by: Krista McDonald on 02/14/2012

Prospective filers looking for relief from overwhelming debt should obtain information about Canada bankruptcy exemptions and other bankruptcy topics from qualified sources. This is because inaccurate information on bankruptcy and matters related to it can have serious effects on preparations for bankruptcy and the possible consequences of a declaration, or even push debtors who could benefit from this legal debt relief option into pursuing less reliable debt management options. Here are some prevalent misconceptions about bankruptcy and what Canada bankruptcy exemption benefits a debtor may receive:

Loss of the Filer’s Home

Losing one’s home is something anyone would fear, but it’s far scarier for people who are already in the midst of staggering debt.  For them, loss of home becomes a very real possibility. Fortunately, in most provinces there are safeguards put in place that allow the filer to retain ownership of certain necessities in the event that he or she declares bankruptcy, with one of these being the filer’s home. This exemption is allowed provided that certain requirements are met.

The exemption of a home from turnover in bankruptcy proceedings is possible in many cases. First, property with a home equity value that does not go beyond the limits stated in local insolvency law can be exempted from liquidation. Although equity value limits can vary from area to area, in several provinces this limit is set at $40,000. Other provinces have no equity allowance at all for home exemptions.  If you are in doubt about whether or not your situation meets the requirements set by your provincial government, a local trustee can help.

Loss of All Assets

It is possible that a bankrupt individual may have to give up a considerable portion of his overall assets because of the debts that need to be paid in bankruptcy proceedings. However, nobody loses all that he or she owns in bankruptcy.  Aside from exemptions that pertain to home ownership, there are other asset exemptions, such as those involving:

• The filer’s work equipment
• Clothing
• Furniture
• Food
• A car or other vehicle
• Family records, photos, and similar items

Again, certain criteria need to be met in order for one of these items to be considered exempt from liquidation.  These laws help to protect the filer’s way of life and permit him or her to improve the chances of restoring financial health amidst the negative effects a bankruptcy filing can bring. As such, it’s important to note that in most cases, luxury items will need to be surrendered to the bankruptcy estate for liquidation – only items considered to be necessities have exemption allowances in place.  Canada bankruptcy exemption law is just one important aspect of bankruptcy that you should know about before you prepare your debt relief strategy. Speak with a licensed bankruptcy trustee to learn more.