While filing for Bankruptcy might sound like the worst-case scenario, sometimes it’s the best option; and the only way to get a fresh financial start. A common misconception about BC Bankruptcy Exemptions is that you’ll lose everything you own. This isn’t the case. The purpose of Bankruptcy is not to punish you, it’s to help you start over.
Each province and territory has a set list of asset exemptions in Bankruptcy. If you’re worried about what you can keep and what you’ll lose if you file, you can speak to one of our trusted Licensed Insolvency Trustees (LIT). An LIT can take you through the B.C. Bankruptcy exemptions, and answer all your questions.
What Will You Lose in Bankruptcy: Non-Exempt Assets
When you declare Bankruptcy, many of your unsecured debts are eliminated. This includes credit card bills, lines of credit, and payday loans. In exchange for debt relief, your LIT will sell many of your assets, including any you acquire during Bankruptcy. The purpose is to raise money to repay some of the debt you owe to your creditors.
What You Can Keep in Bankruptcy: B.C. Bankruptcy Exemptions
B.C. Bankruptcy exemptions describe assets that can not be sold as part of your Bankruptcy. Bankruptcies are governed by the Bankruptcy and Insolvency Act (BIA). The BIA outlines some federal exemptions, including:
- Property you hold in trust for others
- GST credit payments
- Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF).
When filing for Bankruptcy, two of the most frequent concerns people have are:
- Will I lose my house?
- Can I keep my car?
Typically, when you file for Bankruptcy, your secured debts (e.g. house and car) are not impacted, as long as you keep making payments and don’t exceed any equity limits established by the Court Order Enforcement Act.
When it comes to your house, you can keep your primary residence if your home equity does not exceed:
- $12,000 if your principal residence is within the boundaries of the Capital Regional District or the Metro Vancouver Regional District.
- $9,000 if your principal residence is outside of these boundaries.
You are also allowed to keep one vehicle up to $5,000 in value, or up to $2,000 in value if you owe maintenance payments (e.g. child support).
In addition to the exemptions for primary residences and vehicles, other B.C. Bankruptcy exemptions include:
- Household furnishings and appliances: up to $4,000
- Tools and other property used to earn income at work: up to $10,000
- All clothing
- Registered Retirement Savings Plan (RRSP)
- Registered Retirement Income Fund (RRIF)
- Medical and dental aids
Can You Keep Your Earnings in Bankruptcy?
Yes, your wages are not affected by Bankruptcy. However, if your income exceeds standards set by the Office of the Superintendent of Bankruptcy (OSB), you will have to make surplus payments to your LIT, who will distribute them to your creditors.
Surplus income is the part of your earnings that exceeds the amount you and your family need to maintain a reasonable standard of living. If your household income is over the amount set by the OSB, you will have to make additional payments. If your surplus income is more than $200 per month, you pay 50% of the amount.
Alternatives to Bankruptcy
When dealing with your debt, Bankruptcy may not be your only option. When you meet with an LIT they will assess your financial situation and present you with different options, such as a Consumer Proposal or Credit Counselling.
A Consumer Proposal is a legal process that can only be administered by an LIT. In a Proposal, you and your LIT create an offer to your creditors to pay a percentage of your debt, extend the time you have to pay, or both. One of the main benefits of a Consumer Proposal is you don’t lose any of your assets.
The purpose of Credit Counselling is to help you improve your financial education and skills. Depending on your debt issues, your LIT can provide targeted education on budgeting, proper credit use, or debt repayment. Your LIT can also recommend if you need a more structured debt solution, such as a Consumer Proposal or Bankruptcy, to deal with your debt.
Why Work With a Licensed Insolvency Trustee?
If you’re considering Bankruptcy, reach out to a Licensed Insolvency Trustee as soon as possible. An LIT can walk you through the different debt solutions and explain how they work. They can also help you decide which solution is right for you. If you decide to move forward with Bankruptcy, an LIT is the only professional in Canada authorized to administer a Bankruptcy proceeding.
We understand that one of the biggest concerns around Bankruptcy is the idea that you could lose everything you have worked so hard for, including your home. Our LITs can break down exactly what you can expect to keep and what you will have to surrender.