You can declare bankruptcy in Canada and keep your vehicle. Each province or territory has exemptions for your motor vehicle up to a specific value.
Can I file bankruptcy and keep my car?
A Licensed Insolvency Trustee will require some information about your vehicle, such as:
- Make, model, year and registration number.
- The purpose of the car.
- The vehicle’s ownership status (owned outright, leased or financed).
- Appraisal value or fair market value.
If you own your car outright, there’s a decent chance you’ll be able to keep it as long as it is valued below a certain amount.
For example, in British Columbia, equity in a vehicle up to $5,000 is exempt from seizure, so any car worth less than $5,000 is protected.
But if the value exceeds the exempt amount, you must make additional payments to your trustee during your bankruptcy to keep your vehicle.
Ask your trustee about a consumer proposal if you cannot afford to make these extra payments. You can protect multiple vehicles in a consumer proposal if you can afford to make a monthly payment to your creditors.
To find out what your vehicle is worth, you can have your vehicle appraised. A dealer, lender or an independent professional appraiser can carry this out.
A valuation website such as Canadian Black Book is also acceptable to establish a fair market value.
Bankruptcy and car loans
A financed vehicle will not be seized if you file for bankruptcy, as it is a secured debt. You need to continue making your loan payments towards the car loan, or the finance company can repossess the vehicle.
If you cannot afford the car payments, you can stop paying and surrender the car to the lender before filing. This allows any shortfall to be included in your bankruptcy as an unsecured debt.
Can I keep a leased car in bankruptcy?
If you lease your vehicle, it will not be seized if you file for bankruptcy, but you must continue to make payments towards the lease.
If you can’t afford to, you can hand back the vehicle to the leasing company before filing.
A consumer proposal can protect all of your assets
A consumer proposal is a popular alternative to bankruptcy because you can keep all your assets, including your house and car.
You can make an offer to repay what you can afford to your creditors rather than the total amount due, and your creditors forgive the remaining amount.
Any offer depends on the value of your assets, as you must be able to offer your creditors more than what they would receive if you went bankrupt.
If you can afford to make monthly payments to your creditors, then a consumer proposal could work for you.
Claiming bankruptcy and keeping your car is possible
Claiming bankruptcy and keeping your car is possible thanks to asset exemptions for vehicles up to a specific value.
A Licensed Insolvency Trustee can advise you on the best way to protect your car through bankruptcy or an alternative debt relief solution.
There are different rules throughout Canada, so connect with a Licensed Insolvency Trustee in your province or territory.
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