Filing Bankruptcy - The Last Resort

If none of bankruptcy alternatives can help you in managing your money problems, filing bankruptcy may be your only option.

The concept behind personal bankruptcy in Canada is this: you assign (surrender) everything you own - except properties listed as bankruptcy exemptions (explained below) - to a trustee in bankruptcy in exchange for the elimination of your unsecured debts.

Bankruptcy Exemptions Basics

When it comes to bankruptcy exemptions, the rules vary in each province. Below is the list of some of the items listed as exempted by Ontario bankruptcy law:

	$5,000 worth of personal possessions (clothing, jewelry, sports equipment, etc.);
	$5,000 for an automobile;
	$10,000 worth of furnishings;
	$10,000 worth of tools of the trade (equipment that you use to earn a living); and
	Certain types of life insurance.

Technically, everything else that you own is seized by the trustee and sold to repay your creditors.

For details on bankruptcy exemptions in each of the provinces, please visit our Bankruptcy Exemptions in Canada page.

What happens with my house after filing bankruptcy?

Like consumer proposals, bankruptcy only deals with unsecured creditors. Unless you have accumulated significant equity in your home, it will probably be unaffected by your bankruptcy. If you own your own home make certain to discuss the disposition of your home in detail with your trustee before you file bankruptcy.

Can I file for bankruptcy and keep my car at the same time?

If you have clear title to your car (you haven't pledged it as security for a loan), and the car is worth more than $5,000, then you will be required to either pay the trustee the value of the car from your post-bankruptcy earnings or the trustee will be forced to seize and sell your car. If you have a car, or any other type of vehicle, make certain to discuss the disposition of your car with your trustee before you file bankruptcy.

What do I do now?

We recommend that you consider consumer credit counselling or call an accredited trustee in bankruptcy to arrange for a personal consultation. Most of our bankruptcy trustees offer this service free of charge. They will be happy to answer your questions related to filing bankruptcy and bankruptcy exemptions, and provide you with other useful information on debt management matters.