Bankruptcy is a legal process designed to provide people overwhelmed with debt a chance to reset their financial standing. This relief comes at a cost, though, as it can require people to surrender their assets. However, there are important exemptions that can make bankruptcy an option worth considering.
The purpose of bankruptcy
Bankruptcy is not merely about eliminating debts; it’s a structured process that balances the need to provide relief to the debtor with the rights of the creditors. It offers a chance to discharge most unsecured debts and halt the cycle of insolvency, while also ensuring that creditors receive a fair distribution of available assets.
The goal is to allow individuals to emerge from financial turmoil with a clean slate, enabling them to rebuild their financial lives without the burden of insurmountable debt.
Exemptions: What you can keep
The most common concern among those considering bankruptcy is what possessions they might lose. Ontario’s bankruptcy laws understand that stripping debtors of all their assets is counterproductive. To support a fresh start, the law provides for certain exemptions (effective Dec 1, 2015):
- Personal items: Clothing for you and your dependents is exempt without a dollar limit.
- Household goods: Items such as furniture and appliances are exempt up to a value of $14,180.
- Tools of the trade: Tools and equipment used in your trade or profession up to a value of $14,405 are exempt.
- Motor vehicles: One car or truck up to a value of $7,117 is exempt.
- Some homes: A principal residence may be exempt if the equity does not exceed $10,783.
- Pensions and certain insurance policies: The laws protect most pension plans and some insurance policies from creditors.
This list is not exhaustive, and the exact amounts may change over time and vary by province, so consulting with a bankruptcy lawyer is crucial to ensure you have current information.
A new beginning
While bankruptcy may seem daunting, it’s a lawful and legitimate way to regain control of your financial situation. With the right guidance, you can navigate the bankruptcy process with dignity and emerge on the other side ready to rebuild.