Bankruptcy
Know what to expect when declaring bankruptcy in Canada.

Can I Keep My Car If I File for Bankruptcy?

By Jordan Evans 

We find a common question people ask is “Can I keep my car if I file for bankruptcy?” They want to know what happens to your vehicle if you declare bankruptcy. Will you lose your car in the process or will the bankruptcy trustee take it? What can you expect? The answer basically depends on two things: 1) is there a loan on the car, and 2) if there is not a loan, how much is the car worth?

If You Have a Car Loan,
You Keep the Car

Most of us tend to think then when you go bankrupt, you lose everything. In Canada, reality is often a little different. This reality begins with secured debts. If you pledged something as security for loan, the asset that provides collateral for the loan is exempt from bankruptcy. It survives bankruptcy. So if you have a car loan, and your car or truck is collateral for the loan and you file for bankruptcy, the loan and the vehicle are both kept out of the bankruptcy.

If you want to get out of your car loan, you would need to make arrangements to sell the vehicle with the lender or finance company that holds the loan. When the vehicle is sold, the proceeds would be used to pay off the loan.

Blue plastic toy car next to a yellow bag with money written on it and a calculator

If the vehicle sells for less than the loan amount, you would still owe the remaining balance. However, this outstanding balance would then be an unsecured debt and could be included in your bankruptcy if all this transpired before you declare bankruptcy.

If You Fully Own the Car,
You Lose It in Bankruptcy If It’s Worth More Than a Certain Amount

If there is no loan or lien on your vehicle, then your bankruptcy trustee will assess your vehicle’s value. In most provinces across Canada, if you go bankrupt, you get to keep one vehicle that is worth up to a certain amount depending on your province. Here are the maximum vehicle values for the following provinces:

  • Ontario: $6,600
  • BC: $5,000
  • Alberta: $5,000
  • Manitoba: $3,000
  • Saskatchewan: $10,000

If your vehicle is assessed and found to be worth more than the allowed maximum in your province, you can redeem it from being taken in the bankruptcy by paying the difference between its appraised value and the maximum limit. So if your province allows you to keep a vehicle worth up to $5,000 and yours is appraised at $6,000, you could pay your trustee the $1,000 difference. He or she would then put this $1,000 into the pool of money that they would send to your creditors. You would then get to keep your car and not lose it in the bankruptcy.

Repair Your Credit Faster
If You Go Bankrupt, Keeping Your Car Loan Could Help

While this article is just a quick overview of some of the ins and outs of bankruptcy, if you’re thinking of going bankrupt, you have a car loan, and you want to keep your car, keeping up the car loan payments through your bankruptcy and after it will help to improve your credit. Bankruptcy is one of the worst things you can do to your credit, and it takes many years for your credit to recover. However, if you have a debt – like a car loan – that it is being paid as agreed and it keeps reporting on your credit report during and after your bankruptcy, this will help to rebuild your credit more quickly after the bankruptcy.

Alternatives to Declaring Bankruptcy
How to Find Out More & What Might Be Available to You

Most of the time when someone is experiencing financial difficulty, they think that if things don’t improve they’ll have to go bankrupt. The truth is that between financial difficulty and bankruptcy there are a lot of options. Our credit counsellors are experts at helping people explore these options and find the solution that will not only work the best for you today but will put you on the path to achieve you future goals.

For some people, bankruptcy can prevent them from achieving future goals including some career paths. The nice thing is that there are often other options – sometimes lots of them – it all depends on your situation. The best thing you can do is make an appointment to speak with a credit counsellor, go over your situation with them, and see what your options are. If it turns out that bankruptcy is your best option, they’ll layout your next steps for you and refer you to a reputable trustee.

We’re a non-profit service. So appointments with our credit counsellors are always free, non-judgmental, and completely confidential. Call us today, or chat with us online. You have nothing to lose.

Need some questions answered?
Wondering if bankruptcy is for you?
If you feel that you’re situation is so bad that you may need to declare bankruptcy, don’t worry. You’re not alone. This is how a lot of people feel when they don’t see any light at the end of the tunnel.

Fortunately, for many people who feel this way, there are other less severe options. Speak with one of credit counsellors to learn all your options. They’ll be happy to carefully review your whole financial situation with you and answer any questions you may have. Speaking with our certified counsellors is always free, confidential and without any obligation. We’re here to help.

Related Articles

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What is Insolvency?

Insolvency in Canada is a legal last resort when you can no longer repay what you owe.

 

12 Comments

  1. Christine Spires

    I’m currently in consumer proposal but considering bankruptcy again, last bankruptcy was discharged 2011, I have a lot of dept, lower income

    Reply
    • CCS

      Hi Christine, Feel free to give us a call at 1-888-527-8999 and speak with one of our credit counsellors. They can help you by taking a look at your situation and seeing what options are available to you. If bankruptcy is your best option, they will let you know.

      Reply
  2. Trevor Landry

    Hello all I have is a car and car loan. I got a newer car a year and a half ago with a trade in. I got a letter saying they want over 28000 I can’t lose my car it’s all I got to look for a new job and put less stress on my medical issues. What can I do?

    Reply
    • CCS

      Hi Trevor, We would suggest giving us a call at 1-888-527-8999 and making an appointment to speak with one of our Credit Counsellors. They can help you look into your situation and figure out the best way to approach this.

      Reply
  3. Connie Cornell

    If i file for bankruptcy does it affect my spouse-

    Reply
    • CCS

      Yes. The extent to which it effects him or her will depend on a number of things. Unless the assets you jointly own aren’t worth very much, it will effect your assets. It also effects your income as you are only allowed to keep a limited amount of income (the rest goes to your creditors). So your spouse may be effected by the cap on your income for 9 to 21 months. If any of your debts are joint with your spouse, you won’t be able to include those debts in your bankruptcy unless your spouse declares bankruptcy too (as an FYI, secured debts like a mortgage or vehicle loan can’t be included in a bankruptcy). Bankruptcy (and insolvency in general) will effect your credit and could limit your career options. So each of these could potentially impact your spouse too. There are other debt relief options outside of bankruptcy. Speak with a local non-profit credit counsellor to see what other options you might have, and if bankruptcy does look like your best option, they can answer further questions and then refer you to a reputable bankruptcy trustee.

      Reply
  4. Melissa Hurlburt

    I’m thinking about filing bankrupt, but worried about losing my current vehicle,

    Reply
    • CCS

      Just give us a call at 1-888-527-8999 and make an appointment to speak with one of our Credit Counsellors. They can help you look into your financial situation and help you put together a plan.

      Reply
  5. Kayla Crandon

    I need help figuring out what to do with my financial situation. Thank you

    Reply
    • CCS

      Just give us a call at 1-888-527-8999 and make an appointment to speak with one of our Credit Counsellors. They can help you look into your financial situation and help you put together a plan.

      Reply
  6. Holly Macpherson

    Looking for credit counseling on what I should do in my situation

    Reply
    • CCS

      Give us a call at 1-888-527-8999 and we’d be happy to help you.

      Reply
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