Hi there and welcome back to Understanding
Personal Bankruptcy in Canada, the second of a five video introduction series. Today
we will discuss about family heirlooms, personal assets and your vehicles. People wonder about what will happen to any
assets if personal bankruptcy is to be declared. These assets may include a house, a car, family
heirlooms, items in the home and in some cases a job.
In most cases pensions are excluded from bankruptcy proceedings except for the last 12 months
contributions. See the exemption lists on our forum for more info. Each province has limits as to what personal
assets each person can keep. Above these limits, personal assets can be seized by a trustee
and can be given to the creditors. Personal assets include Household goods including,
food, tools of trade, hunting tools, medical aids, Life insurance, Pets, metals and decorations,
and property or gifts given within the last 12 months to friends or family. Its pertinent to understand how exemptions
work and what will be kept and what must be surrendered. Let us look at the understanding
of asset exemptions as understood by persons who were previously bankrupt.
As an example, consider Household items and the Province of Ontario with an exemption
limit of $11,300 .The Trustee in Bankruptcy will ask you: Do you Have more than $11,300
in value household items? If the answer is No, they they go to the next
question. If Yes, they will require a list of what is
in your home and the value of each. The excess will be seized by the trustee.
Note that a trustee will not visit your home to verify these This question will continue with all assets
you have. An email with a complete list of assets that will be queried is to be emailed
to all subscribers to this video series. Lets look at personal assets a little closer
and begin with a house and personal bankruptcy. The first question that needs to be asked
is how much equity do you have in your home Equity is referred to the value of your home
that is not mortgaged This is the amount of your home that’s been
paid for and that will include the down payment that was placed when the purchase completed.
This example shows a home with an equity of $45,000 The trustee in bankruptcy has the authority
to seize the house, sell it, and use the proceeds to repay those whom the bankrupt owes money.
For this to be done there will be lawyer fee, real estate commissions and other fees that
will need to be paid for the repossession and sale of house.
The costs for doing this can range from $20,000-$25,000. The trustee will check the value of the home
by consulting with the mortgage provider. If the trustee decides that selling the house,
less the cost of repossession and seizing of the home, is a sizable amount of money
to be gained, then the home will be seized and sold.
Each Province has its own exemptions limits or none thereof. However the final decision
on this lies with a trustee in bankruptcy Provincial exemptions are as provided in the
next slide. These exemptions are the equity in a home that a trustee will not touch based
on the law in different provinces. You may be asking what are the $0 exemptions
in some of the provinces. This is telling you that the entire equity of your home can
be put towards repayment of debts. However, the repossession and sale of a home will include
lawyers and real estate fees which in Ontario may cost between $20,000-$25,000
Therefore, if the equity in the home is not more than this amount then a trustee will
NOT seize the home and sell it. Please note that this is a guideline, and
only a trustee in bankruptcy who is previewing the case can give a verdict on it. If there is much equity in a house, all will
be lost in a bankruptcy. In such cases, if applicable, a consumer proposal will enable
the owners to keep their house. Consider Scenario 1. The Equity in the home
is equal to the cost of repossession. In such cases, the trustee will leave the house alone.
In Scenario 2. The net value to the trustee is $60,000. Therefore the house will be sold. If the trustee chooses to leave the owners
with the home even though there is a $0 exemption limit, this may be as a result of having a
home with a very high mortgage and no equity. This is probably one of the reasons why some
may find themselves in bankruptcy right now. A mortgage can be included voluntarily in
the bankruptcy and a person can be completely debt-free in 9 to 36 months.
However before doing that, Moneyandbusiness.ca strongly recommends reading the e-book on
Five Things To Do Before Personal Bankruptcy If the vehicle is valued more than these amounts,
a payment can be made to the trustee for the difference above this value, or the trustee
will sell the vehicle. If there is more than one vehicle, then the
trustee will need to be paid the value of the additional vehicle to keep it. If this
amount cannot be afforded, then the trustee will seize the second vehicle.
If the combined value of two or more vehicles is less than the total exemption amounts,
the law only allows you to keep one vehicle. Therefore any additional vehicles will be
taken by your trustee. In the asset exemption example given before,
household items were mentioned. Household items are anything that is in the home and
that includes the television, sofa, bed, utensils, appliances and any other valuables in the
home. If the household items value above the provincial
limits, then the trustee will require a list of everything in your home and items above
the exemption limits will be seized. Note that a trustee in bankruptcy will not
visit your home unless in exceptional cases where fraud is suspected. This table shows the exemption limits for
the household items for various provinces. There are little differences between the various
provinces and these include the value of items exempted. Nunavut, Saskatchewan and Yukon
are fully exempt. Note the exemption limits for your province. The value of the clothing items that are in
a person’s possession may be subjected to provincial exemption limits as well.
Some provinces allow a person to keep all clothing items while some will require items
above a certain value to be surrendered to the trustee in bankruptcy.
Note well the exemption limits for your province or territory Some provinces and territories have specific
dollar value items listed. Orders are listed as necessary. This means that the value of
the clothing needed for living is at the discretion of a trustee in bankruptcy. Nunavut and British
Columbia are fully exempt. The trustee will not visit your home to examine your clothing
items. Some provinces do not mention food items as
these are not considered for seizure and therefore there are no specific limits set. In other
words these were not be touched. New Brunswick, Nova Scotia, and Québec list
food items as necessary, and all the other provinces lists a time for which food items
can be stored. Tools of trades needed for business or income
generation generally have a high exemption limit for most provinces.
Québec and Saskatchewan do not have specific instructions for tools of trade and therefore
these may be included in the household items or other items of value.
Note the exemption limits for your province or territory. Items such as hunting tools, life insurance
policies and sentimental values are specifically mentioned in a few provinces. In other provinces
these are simply not mentioned and will be considered just as items of value. In Summary,
Only Newfoundland and Labrador has an exemption limit for sentimental value items such as
family heirlooms. Other property will have a limit as to how
much can be kept. You are encouraged to preview the tables given in this video
Most provinces allow a person to keep one vehicle below a certain value. Thank you for watching.