what can you keep

What can you keep when filing bankruptcy – federal and provincial exemptions

What can you keep when filing for personal bankruptcy?

This is a common question. When an individual files for personal bankruptcy, her Licensed Insolvency Trustee takes possession of her property, which is then used to satisfy her outstanding debts.  This is the general rule of thumb. However, the trustee (and therefore the bankrupt’s creditors) are not entitled to any property that is considered exempt under the federal Bankruptcy and Insolvency Act or under the laws of the provinces in Canada.  In these instances, the exempt property in questions continues to be the property of the bankrupt.

The various federal and provincial exemptions are as follows:

The federal Bankruptcy and Insolvency Act

Section 67 of the Bankruptcy and Insolvency Act (BIA) establishes four general categories of exempt property:

  • property held by the bankrupt in trust for other persons;
  • property of the bankrupt that is exempt from seizure under the applicable provincial law where the property is situated and where the bankrupt resides;
  • GST credit payments and prescribed payments relating to the essential needs of individuals; and
  • Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs),  and Deferred Profit Sharing Plans (DPSPs) apart from any contributions made in the last 12 months before bankruptcy.

Provincial & Territorial Exemptions

The policy reason for ensuring that a debtor can retain certain property is straightforward:  a person requires essentials such as clothing, household goods and property necessary to earn a living.  Moreover, provincial laws may also exempt certain forms of retirement savings in order to encourage people to save for their retirement years.

Alberta

  • food for a 12-month period;
  • clothing up to a value of $4,000;
  • household furniture and appliances up to a value of $4,000;
  • a motor vehicle to a value of not more than $5,000;
  • equity in a principal residence up to $40,000 (reduced to the debtor’s share if he or she is a co-owner);
  • where the debtor is a bona fide farmer whose principal source of income is from farming, 160 acres of land if the debtor’s principal residence is located on the 160 acres and that tract of land is part of the debtor’s farm;
  • farm property required for 12 months’ operations;
  • personal property required to earn an income to a maximum value of $10,000; and
  • social allowance, handicap benefit or widow’s pension, if these benefits are not intermingled with other funds;
  • health aids.

British Columbia

  • equity in a home in Greater Vancouver and Victoria equal to $12,000; in the rest of the province, home equity to a maximum of $9,000;
  • household furniture and appliances up to a value of $4,000;
  • a motor vehicle to a value of not more than $5,000 (the vehicle exemption is reduced to $2,000 if the debtor has not made child maintenance payments);
  • tools and other personal property required to earn an income to a maximum value of $10,000;
  • clothing and medical aids of unlimited value.

Manitoba

  • Food and fuel: six months’ supply or cash equivalent.
  • Clothing: no dollar limit.
  • Household furniture and appliances: up to $4,500
  • One motor vehicle (needed for occupation): non-farmers up to $3,000, farmers no limit.
  • Health aids: no dollar limit.
  • Tools of your trade: up to $7,500.
  • Farm property: buildings and requirements for 12 months operations.
  • Principal residence: farm house; non-farmers up to $2,500, or $1,500 if you are a co-owner.
  • Farm land: up to 160 acres.
  • Items needed for religious services.
  • Locked-in pension plans.
  • Certain life insurance policies.
  • Municipal or school property.

New Brunswick

  • Food and fuel: three months’ supply.
  • Clothing: no dollar limit.
  • Household furniture and appliances: up to $5,000 (more in some cases).
  • One motor vehicle (needed for occupation): up to $6,500 (more in some cases).
  • Health aids: no dollar limit.
  • Tools of your trade: up to $6,500.
  • Farm property: farm animals to specified limits, their feed for six months, and seeds to specified limits.
  • Items needed for religious services.
  • Pets
  • Pension plans

Newfoundland and Labrador

  • food and fuel required by the debtor andher dependants during the next 12 months;
  • necessary clothing of the debtor and her dependants up to a maximum value of $4,000;
  • household furnishings, utensils, equipment and appliances up to a maximum value of $4,000;
  • one motor vehicle to a maximum value of $2,000;
  • medical and dental aids required by the debtor and her dependants;
  • items of sentimental value to the debtor valued at not more than $500;
  • domesticated animals (pets) not used for a business purpose;
  • the debtor’s principal residence to a maximum value of $10,000;
  • either
    1. personal property used to earn income from an occupation, trade, business or calling to a maximum value of $10,000; or
    2. where the debtor’s primary occupation is farming, fishing or aquaculture, personal property ordinarily used by and necessary for the debtor to earn income from those occupations to a maximum value of $10,000;
  • a pension plan, unless otherwise provided;
  • property as prescribed by regulation; and
  • net income to a maximum prescribed amount.

Nova Scotia

  • Food and fuel: no dollar limit.
  • Clothing: no dollar limit.
  • Household goods: up to $6,500, more in some cases.
  • One motor vehicle: up to $3,000, or up to $6,500 if needed in occupation.
  • Health aids: no dollar limit.
  • Tools of any occupation: up to $1,000.
  • Seeds and livestock for domestic use: no dollar limit.
  • Principal residence: none.

Ontario

  • Household furnishings and appliances up to $13,150
  • your principal residence is exempt from seizure IF the equity in your home does not exceed $10,000. If the equity does exceed $10,000 then your principal residence is subject to seizure and sale
  • All necessary clothing
  • Tools of the trade up to $11,300
  • A vehicle valued up to $6,600
  • Pensions
  • Other special exemptions for farmers
  • Certain life insurance policies and certain RRSPs

Prince Edward Island 

  • Food, fuel, household furniture, appliances: up to $2,000.
  • Clothing: no dollar limit.
  • One motor vehicle (needed for occupation): up to $6,500.
  • Health aids: no dollar limit.
  • Tools of your trade: up to $2,000.
  • Farm property: seed for up to 100 acres, other up to $5,000.
  • Principal residence: none.
  • RRSPs with beneficiary a family member: no dollar limit.

If you are behind on child or spousal support payments, the above exemptions do not apply to any item but tools of your trade.

Quebec

  • unlimited food and fuel;
  • unlimited clothing;
  • household furniture and appliances up to $6,000;
  • motor vehicle (no dollar limit);
  • disability aids and accident benefits;
  • tools of your trade (no dollar limit);
  • farm property (no dollar limit);
  • up to $10,000 equity in a principal residence;
  • an immovable serving as a principal residence, in certain cases, where the amount of the claim is less than $10,000;
  • support that has been court-ordered, donated, or received in a bequest;
  • property declared exempt by a donor or a will;
  • a portion of salary, based on the number of the debtor’s dependants;
  • benefits payable and employer contributions under a pension plan;
  • family papers and portraits, medals and other decorations, and documents;
  • items used in religious worship;
  • income for services as a minister of religion;
  • food, lodging and transportation passes received for employment travel.

Saskatchewan

  • Food and fuel: cash equivalent of supply until the next harvest.
  • Clothing: no dollar limit.
  • Household furniture and appliances: up to $4,500 (or $10,000 for a farm).
  • One motor vehicle (needed for occupation): no dollar limit.
  • Health aids: none.
  • Tools of your trade: up to $4,500.
  • Farm property: livestock and equipment for up to 12 months, two bushels seed per acre of land under cultivation, and enough cash or current crop for farming costs to the next harvest.
  • Principal residence: up to $32,000 (your share) and associated land up to 160 acres.
  • All retirement savings plans: RRSPs, RRIFs, and DPSPs.
  • Certain life insurance policies.

Yukon, Northwest Territories, and Nunavut

  • a 12-month supply of food and fuel;
  • clothing (no dollar limit);
  • household furniture and appliances up to $200;
  • health aids;
  • tools and animals of one’s trade, including a motor vehicle, up to $600;
  • equity in a principal residence up to $3,000; and
  • RRSPs associated with insurance policies.

However, none of the exemptions in the territories apply if a debtor is behind on child or spousal payments, or has absconded from the territories, leaving no spouse or family behind.

Disclaimer:

This material deals with complex matters and may not apply to particular facts and circumstances. As well, the material and the references contained therein reflect laws and practices that are subjects to change. For these reasons, this article should not be relied upon as a substitute for specialized professional advice in connection with any particular matter.

For interpretation of the rules in your case, we strongly recommend that you contact a Licensed Insolvency Trustee to review your situation to determine which assets would be exempt if you were to file for bankruptcy.