Will I lose my vehicle if I file for bankruptcy?

Wednesday, July 1, 2020 - 16:23

Bankruptcy, Asset Concerns

In most cases, a bankrupt is able to keep their vehicle. Vehicles typically fall into three categories:

Vehicles that still have money owing on them.

  • To keep these vehicles the bankrupt will need the car payment to be up to date when they go into bankruptcy and keep future payments up to date or the bank or financing company will seize the vehicle. If the payments are up to date the bank cannot seize the vehicle or call the loan. The bankrupt can, however, at the beginning of the bankruptcy, choose to voluntarily return the vehicle and include the car loan in the bankruptcy.

Vehicles that are owned outright.

  • A vehicle that is owned outright may still be retained by an individual filing for bankruptcy if the vehicle is needed for work and/or medical reasons and is worth less than a specified dollar value. The specified dollar values are called exemption limits and are different for each province, but in Ontario if you own a vehicle that does not exceed a value of $6,600, it is exempt form seizure.

Vehicles that are leased. 

  • Leased vehicles are treated differently than owned vehicles. Technically you do not own your leased car. You have the right to use the car in exchange for your obligation to make lease payments. If your lease payments are current, you can keep your car, no matter the value. You can, if you prefer, also surrender your leased vehicle and include any shortfall debt as a debt to be eliminated in your bankruptcy. This is a good option if you can’t afford your lease payments.

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