Declaring bankruptcy does not mean losing everything. Many goods are elusive and there are solutions to preserve the other goods you hold.
Contrary to popular belief, you can keep the majority of your property despite a bankruptcy. These assets that you can keep are called “elusive” and this means that neither the trustee nor your creditors can seize them.
Here are the most common elusive goods:
- the furniture of your principal residence up to $ 7,000 (liquidation value and not the price paid on the purchase)
- your automobile (provided it is essential for your work, education or essential health care and is of reasonable value, less than $ 10,000)
- an inheritance (if the will contains the necessary clauses to make it unseizable)
- your clothes
- your food
- the instruments necessary for your work
- disability insurance benefits and monetary compensation for physical injuries
To this list can be added in some cases:
- A property (house, condo, cottage, land, etc.) whose market value is lower than the secured debts (mortgage, mortgage line of credit, arrears of taxes and others) and for which the payments are up to date.
- Cars, motorcycles, boats, snowmobiles and other recreational vehicles rented or financed provided that the market value is less than the amount due to the creditor.
On the other hand, if you hold other assets and are seizable , it is usually possible to offer compensation to your creditors in order to keep them. The compensation must be an amount of money equivalent to the market value of the property.
It is not uncommon to see offsets for assets such as:
- an automobile or any other vehicle that does not meet the previously mentioned criteria
- equity in a building
- a registered student savings plan
- a cash surrender or borrowing value of a life insurance policy
Take an example
Stephen and Mary want to go bankrupt and keep their home. Their house is worth $ 250,000 in the market and they have mortgage balance of $ 225,000. If the trustee were to sell, he would only get about $ 10,000 after paying the real estate broker’s commission and the various expenses related to the sale. To keep their house, Étienne and Marie will have to offer their creditor the same amount ($ 10,000) to “compensate” them. If necessary, this amount will be payable to the trustee and may be spread over several months.
The licensed insolvency trustee can help you determine which of your assets are seizable or unseizable, and explain all the implications of a personal bankruptcy.
You can consult us free of charge, without obligation and in complete confidentiality in order to obtain the information necessary for your decision making.