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Property of the Bankrupt (Exempt Assets) (Section 67)
In most provinces across Canada, there are a number of exemptions that protect a portion of your assets when you declare bankruptcy. To find out exactly what would be exempt in your specific financial situation, we recommend talking to a Debt Relief Specialist at Bromwich+Smith.
Following is a general summary of exemptions available:
ALBERTA EXEMPTIONS
- The equity in your principal residence, up to a value of $40,000.00;
- Tools of your trade required to earn income from your occupation, up to a value of $10,000;
- Registered Retirement Savings Plans RRSPs, Registered Retirement Income Funds (RRIFs), Registered Disability Savings Plans (RDSP), Deferred Profit Sharing Plans (DPSPs) and Registered Education Saving Plans (RESP’s). There are limitations based on contributions made within the months preceding a bankruptcy;
- Up to $5,000 in a motor vehicle;
- Household furnishings and appliances up to a resale value of $4,000;
- Clothing up to $4,000
ONTARIO EXEMPTIONS
- The equity in your principal residence, up to a value of $10,000.00;
- Tools of your trade required to earn income from your occupation, up to a value of $11,300;
- Registered Retirement Savings Plans RRSPs, Registered Retirement Income Funds (RRIFs), Registered Disability Savings Plans (RDSP), Deferred Profit Sharing Plans (DPSPs) and Registered Education Saving Plans (RESP’s). There are limitations based on contributions made within the months preceding a bankruptcy;
- Up to $6,600 in a motor vehicle
- Household furnishings and appliances up to a resale value of $13,150;
- All necessary clothing
Exemptions are described in detail in the following documents:
The Civil Enforcement Act of Alberta
and The Bankruptcy & Insolvency Act (Section 67)
The Bankruptcy & Insolvency Act is a federal statute. This means that the rules apply to each and every citizen across Canada, regardless of which province they live in. Although the Act is applicable across all provinces, there are variations according to each province with respect to the assets that are exempt from the creditors (the things that the creditors can’t have taken and sold in a bankruptcy).
If you were to go into bankruptcy and be stripped of all of your property you would be in an even worse situation! That’s why when the Act was created. Section 67 set out property that is exempt from your creditors.
Section 67 of the Bankruptcy & Insolvency Act
Note: Entire Bankruptcy & Insolvency Act can be found at http://laws-lois.justice.gc.ca/eng/acts/b-3/
67 (1) The property of a bankrupt divisible among his creditors shall not comprise
(a) property held by the bankrupt in trust for any other person;
(b) any property that as against the bankrupt is exempt from execution or seizure under any laws applicable in the province within which the property is situated and within which the bankrupt resides;
(b.1) goods and services tax credit payments that are made in prescribed circumstances to the bankrupt and that are not property referred to in paragraph (a) or (b);
(b.2) prescribed payments relating to the essential needs of an individual that are made in prescribed circumstances to the bankrupt and that are not property referred to in paragraph (a) or (b); or
(b.3) without restricting the generality of paragraph (b), property in a registered retirement savings plan or a registered retirement income fund, as those expressions are defined in the Income Tax Act, or in any prescribed plan, other than property contributed to any such plan or fund in the 12 months before the date of bankruptcy,
but it shall comprise
(c) all property wherever situated of the bankrupt at the date of the bankruptcy or that may be acquired by or devolve on the bankrupt before their discharge, including any refund owing to the bankrupt under the Income Tax Act in respect of the calendar year — or the fiscal year of the bankrupt if it is different from the calendar year — in which the bankrupt became a bankrupt, except the portion that
(i) is not subject to the operation of this Act, or
(ii) in the case of a bankrupt who is the judgment debtor named in a garnishee summons served on Her Majesty under the Family Orders and Agreements Enforcement Assistance Act, is garnishable money that is payable to the bankrupt and is to be paid under the garnishee summons, and
(d) such powers in or over or in respect of the property as might have been exercised by the bankrupt for his own benefit.
Deemed trusts
(2) Subject to subsection (3), notwithstanding any provision in federal or provincial legislation that has the effect of deeming property to be held in trust for Her Majesty, property of a bankrupt shall not be regarded as held in trust for Her Majesty for the purpose of paragraph (1)(a) unless it would be so regarded in the absence of that statutory provision.
Exceptions
(3) Subsection (2) does not apply in respect of amounts deemed to be held in trust under subsection 227(4) or (4.1) of the Income Tax Act, subsection 23(3) or (4) of the Canada Pension Plan or subsection 86(2) or (2.1) of the Employment Insurance Act (each of which is in this subsection referred to as a “federal provision”) nor in respect of amounts deemed to be held in trust under any law of a province that creates a deemed trust the sole purpose of which is to ensure remittance to Her Majesty in right of the province of amounts deducted or withheld under a law of the province where
(a) that law of the province imposes a tax similar in nature to the tax imposed under the Income Tax Act and the amounts deducted or withheld under that law of the province are of the same nature as the amounts referred to in subsection 227(4) or (4.1) of the Income Tax Act, or
(b) the province is a province providing a comprehensive pension plan as defined in subsection 3(1) of the Canada Pension Plan, that law of the province establishes a provincial pension plan as defined in that subsection and the amounts deducted or withheld under that law of the province are of the same nature as amounts referred to in subsection 23(3) or (4) of the Canada Pension Plan,
and for the purpose of this subsection, any provision of a law of a province that creates a deemed trust is, notwithstanding any Act of Canada or of a province or any other law, deemed to have the same effect and scope against any creditor, however secured, as the corresponding federal provision.