Worried about losing your home or car? Learn which assets are protected under Canadian law and how to structure debt relief to keep what matters most.
You Don't Have to Lose Everything
One of the biggest misconceptions about debt relief in Canada is that you'll lose all your assets. While bankruptcy does involve surrendering certain assets, Consumer Proposals allow you to keep everything. Understanding the rules can help you make informed decisions.
Consumer Proposal: Keep All Your Assets
The biggest advantage of a Consumer Proposal is simple: you keep everything. Your home, car, investments, RRSP, TFSA, and personal belongings remain yours.
This makes Consumer Proposals the preferred option for:
- Homeowners with equity
- People with vehicles needed for work
- Anyone with retirement savings
- Business owners with assets
Bankruptcy: Understanding Exemptions
If you file for bankruptcy, certain assets are exempt under provincial law. These exemptions vary by province, but generally include:
Ontario Exemptions:
- Motor vehicle up to $7,117 in value
- Home equity up to $10,783
- Household furnishings and appliances up to $13,150
- Tools of trade up to $11,975
- RRSPs (except contributions in the last 12 months)
Alberta Exemptions:
- Motor vehicle up to $5,000
- Home equity up to $40,000
- Household furnishings up to $4,000
- Tools of trade up to $10,000
- RRSPs and pensions (fully exempt)
British Columbia Exemptions:
- Motor vehicle up to $5,000
- Home equity up to $12,000 (or $17,000 in certain areas)
- Household furnishings up to $4,000
- Tools of trade up to $10,000
- RRSPs (except contributions in the last 12 months)
What Happens to Your Home?
If You Have a Mortgage:
As long as you continue making mortgage payments, you can keep your home in both Consumer Proposals and bankruptcy (subject to equity exemptions in bankruptcy).
If You Have Significant Equity:
- Consumer Proposal: You keep your home regardless of equity
- Bankruptcy: If equity exceeds the exemption limit, you may need to refinance to buy back the equity or surrender the property
Protecting Your Vehicle
Most Canadians can keep their vehicle in bankruptcy if:
- The value is under the provincial exemption limit
- You continue making loan/lease payments
- The vehicle is necessary for work or family needs
In a Consumer Proposal, you keep your vehicle regardless of value.
What About RRSPs and TFSAs?
RRSPs:
- Protected in bankruptcy (except contributions made in the 12 months before filing)
- Fully protected in Consumer Proposals
TFSAs:
- NOT protected in bankruptcy (must be surrendered)
- Fully protected in Consumer Proposals
Strategic Asset Protection
If you have significant assets, working with a Licensed Insolvency Trustee to structure a Consumer Proposal is almost always the better choice. You can negotiate a payment plan that allows you to keep everything while still reducing your debt burden.
The key is to seek advice early, before creditors take legal action or your financial situation deteriorates further.