There is no quick answer to this question as it depends on a lot of different factors, including how much you owe, how much equity is in your home or car, and their current value. Let’s explore this a little further…
Keeping your house during bankruptcy in Ontario
In Ontario, your principal residence is exempt from seizure if the equity in it is not more than $10,000. So, for example, if you have a house worth $500,000 and your mortgage is $495,000, your home is exempt from seizure because your equity is less than $10,000.
However, if the amount of equity in your home is greater than $10,000, you can actually buy the equity back from your Trustee (as it now technically belongs to them to repay your debts). This will be spread over an agreed-upon period of time so that you can keep your house. If you can’t afford to buy the equity back from the house, then you may have to sell or refinance it.
Keeping your car during bankruptcy in Ontario
In Ontario, there is a bankruptcy exemption for a motor vehicle to the value of $6,600. This means that if the value of your car is less than $6,600, then it will not be seized as part of your bankruptcy proceedings.
If your car is financed or leased, then you can still keep your car during bankruptcy as long as you keep paying your car payments.
However, if your vehicle is worth more than the $6,600 exemption, you may still be able to keep it. Your Trustee can make an arrangement with you to repurchase the equity over a period of time.
Scenarios of how to keep your car and home during bankruptcy
Let’s use a few hypothetical scenarios to see where it may be possible to keep a home, condo, or vehicle during bankruptcy:
Your home has $25,000 of equity in it and a mortgage of $300,000. Your car is leased through Honda Finance Canada.
The exemption limit of a primary residence in Ontario bankruptcy is $10,000. However, given that this home has $25,000 in equity, the debtor will have to buy back the equity of $25,000 from a Licensed Insolvency Trustee over an agreed-upon period of time. As there is no equity in the car, you can keep it and pay the monthly payments, if you wish.
Your primary residence is fully mortgaged and you have $0 of equity in the home. Your car is leased from Kia and you have $0 of equity in it. You own a small condo in Cottage Country worth $100,000 and have no mortgage on that property.
Your primary residence is exempt as you have less than $10,000 of equity, but your condo isn’t because it is not your primary residence. Therefore, you will either have to buy back the entire $100,000 of equity from the Trustee or let them sell the property for the benefit of the creditors.
Your vehicle is exempt as it has less than $6,600 of equity.
Bankruptcy advice from the professionals
At Harris & Partners, we’ve been successfully helping people to navigate the complexities of bankruptcy for over forty years. For more information on how we can help you understand your bankruptcy options, please contact our Licensed Insolvency Trustees.