You Won’t Automatically Lose Everything to Bankruptcy
Bankruptcy, however, doesn’t mean that you automatically lose everything you own. If you still have money in an RRSP, only the most recent 12 months of contributions are used to pay your creditors. Most provinces allow you to keep your personal items and basic household furnishings as long as their value doesn’t exceed certain provincial limits. You are also allowed to keep necessary medical and health related equipment.
Some provinces have provisions that allow you to keep a modest priced vehicle as long you don’t have a lot of equity in it. You may also be able to keep the tools you need to earn a living, as long as their value is within the allowable limit.
However, the biggest question most homeowners have is if they can file for bankruptcy and keep their house. Generally speaking, if you have assets above what you’re allowed to keep your trustee will arrange to sell those assets so that the money can be used to pay your creditors. However, if your finances allow for it, you might be able to buy out the surplus and not lose your home.
Consider Other Options and Alternatives to Bankruptcy
Bankruptcy is not meant to solve a short-term cash crunch. It should be used as a last resort. That’s why it’s important to reflect on what got you into debt in the first place. Canadian bankruptcy laws are designed to provide legal protection for people in severe financial hardship and to give them an opportunity for a fresh start. You owe it to yourself to carefully explore all of your options and the implications of each.
Alternatives to bankruptcy include debt consolidation loans, debt repayment programs, debt settlements, consumer proposals, or even communicating with your creditors because you’ve got no ability to repay your debts for the foreseeable future and you’ve got no assets to sell to come up with a lump sum payment.
This is where one of our credit counsellors can help you to weigh the pros and cons of each option. We provide this service to you for free, and if bankruptcy looks like an option you should explore, we’ll refer you to reputable trustees in your area.
6 Times When Bankruptcy Might Not Be Right for You