Will I lose my motorcycle, ATV and snowmobile if I go bankrupt?

Sunday, July 9, 2017 - 22:13

Bankruptcy, Asset Concerns


Many people that come into my office are struggling with debt, but have a hard time with the idea of letting go of their belongings. I get it. You’ve worked hard for your possessions and now that you’ve come onto some difficult times, it’s hard to see those possessions get taken away. This conversation comes up quite frequently during initial consultations with clients. The good news is, you won’t necessarily lose those possessions.

If there is a loan against your recreational equipment, you may continue making the monthly loan payments if you can afford to do so. This is because the loan company is typically a secured creditor and is not affected by the bankruptcy.

You will have to make arrangements with the Trustee if there is any equity in your recreational equipment. Equity is the difference between the value of the item and the amount owing on the loan. If there is equity, then you will have to pay the equity to the Trustee if you want to keep your recreational equipment. In most cases, the person going bankrupt arranges a monthly payment to the Trustee to pay off the amount of equity.

If you cannot afford to continue the monthly payments to the loan company, then you can choose to give up the recreational equipment as part of the bankruptcy. When doing so, as part of a bankruptcy, you do not have to worry about the creditor suing you for the amount left owing on the loan.

You are permitted to keep some assets in a bankruptcy. These exemptions are set by various federal and provincial laws. For personal bankruptcy in Ontario, the following assets are exempt:

  • $5,650 worth of personal possessions (clothing, jewelry, sports equipment, etc.);
  • One motor vehicle worth up to $5,650;
  • $11,300 worth of home furnishings;
  • $11,300 worth of tools of the trade;
  • Certain types of life insurance;
  • All RRSP, RRIF and SPSP (Deferred Profit Sharing Plan) savings except contributions made in the 12 months before your bankruptcy.

If you are considering bankruptcy, but want to keep your possessions, consider setting up a no-obligation consultation with one of our licensed insolvency trustees. We will review all of your options and make sure we choose the best solution for your situation.

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