One of the biggest concerns for many people is what will happen to their assets if they file for bankruptcy protection. While bankruptcy can provide relief from overwhelming debt, it's important to understand what assets may be seized, what assets you can keep, and why a consumer proposal may be a better option for some individuals.

What Assets Are Seized in Bankruptcy?

In Ontario, certain assets are exempt from seizure in bankruptcy. These assets are protected and you will be able to keep them. Examples of exempt assets include:

• All necessary clothing
• Household furnishings and appliances (up to $14,180 as of 2022)
• Tools of your trade (up to $14,405 as of 2022)
• A vehicle with a value of up to $7,117 (as of 2022)
• RRSPs, RRIFs, DPSP (Deferred Profit Sharing Plan), except contributions made in the 12 months before your bankruptcy
• Your principal residence if the equity in your home does not exceed $10,783 (as of 2022)
• Certain types of life insurance

It's important to note that the trustee will only sell non-exempt assets that have significant value. In many cases, individuals are able to keep most or all of their assets.

Is a Consumer Proposal better for me?

While personal bankruptcy can provide relief from overwhelming debt, it's not always the best option for everyone. A consumer proposal is an alternative to bankruptcy that can provide similar benefits while allowing you to keep all of your assets.

A consumer proposal is a formal offer to your creditors to pay a portion of your debt over a period of time, typically up to five years. The proposal is negotiated with the help of a licensed insolvency trustee, and if accepted by your creditors, you will make monthly payments to the trustee, who will distribute them to your creditors. The advantage of a consumer proposal is that you can keep your assets, as you are not required to sell them to pay your creditors and can reduce your debts.

Pros of a Consumer Proposal

• You can keep your assets, including your home and vehicle
• You can negotiate a lower monthly payment, based on your income and expenses
• There is less of an impact on your credit score than in bankruptcy
• You will be protected from collection agencies and creditors

Cons of a Consumer Proposal

• Your creditors may not accept the proposal, in which case you may need to consider other options, such as bankruptcy
• You will be required to make monthly payments over a period of time
• Your credit score may be negatively impacted while the proposal is in effect

Before filing for bankruptcy, understanding what assets may be seized is an important consideration. While bankruptcy can provide relief from overwhelming debt, a consumer proposal may be a better option for some individuals. If you're struggling with overwhelming debt, it's important to speak with a licensed insolvency trustee to determine the best course of action for your situation.

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