Goal of Bankruptcy

Sunday, November 10, 2019 - 14:15


The goal of most bankruptcies is to discharge as much debt as possible. You are eliminating your obligation to pay on your late and missed unsecured debts. Bankruptcy is a relatively easy way to get rid of your debt permanently. Another way bankruptcy can benefit you is to stop creditor harassment, and the anxiety associated with excessive debt can also be eliminated.

If you have secured debt such as a home or a car, bankruptcy does offer some protection for those debts. The following assets are exempt from seizure by creditors: 

  • Personal possessions totalling up to $5,650
  • A motor vehicle valued up to $5,650
  • Household furniture and appliances totalling up to $11,300
  • Tools/equipment used to earn a living totalling up to $11,300
  • Most life insurance policies
  • Majority of RRSPs and pensions

A common concern when it comes to bankruptcy is whether or not someone will lose their house if they go bankruptcy

Well, the answer depends on whether or not there is any net equity available if the property was to be sold. Net equity is calculated as: appraised value minus selling costs and mortgages.

If there is no net equity in the property (ie: the value of the property is less than the amount of the mortgages and selling costs) then there is no issue with keeping the property.

If there is net equity (ie: the value of the property is more than the amount of the mortgages and selling costs) then creditors would want the debtor’s share of this net equity amount to be paid to them.

Having net equity does not mean that you would have to sell your house. It does not matter to your creditors whether the net equity proceeds come from the sale of the house by the licensed insolvency trustee or from you personally. If you are able to make payments totalling the amount of the net equity, you can keep your house.  

Many people that go bankrupt own their homes. Though some have equity in their properties and others do not, the majority in each group are able to keep their homes despite their filing personal bankruptcy.

If you are considering bankruptcy and have questions, contact our office today for a free, no-obligation consultation. We’re here to help!

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