03 Jan How are assets affected by insolvency?
When clients are dealing with financial issues, one of their biggest worries is how their assets will be affected by insolvency. Assets include money, land, movable and immovable property, and personal belongings, situated in Canada or elsewhere.
So, it’s understandable our clients may be concerned about whether or not they will be able to protect and keep their home, car(s), personal property and retirement savings. Below, we briefly cover some of the realities of insolvency and bankruptcy, and how it may affect your ability to hold onto the things you hold most dear.
Cash-flow insolvency is when a person or business has sufficient assets to repay their debt, but cannot make cash payments. What that means is you may be in possession of a highly valuable house or car, but these assets cannot be easily liquidated to create the cash-flow necessary to pay off your debt.
Alternatively, balance-sheet insolvency is when your liabilities total more than the value of your assets, so you become unable to raise enough cash to meet the obligations of your debt.
In both of these circumstances, our clients may be in a position to file a Consumer Proposal or Bankruptcy. But, we want to assure you, this does not mean you will need to relinquish all your assets. In Ontario, certain assets are exempt from seizure. The list below may not be comprehensive, but it should give you a good idea of what you can retain when you are dealing with debt insolvency.
Bankruptcy Exemptions in Ontario
For individuals, the following are exempt from forced seizure by any legal process:
- All necessary clothing for you and your dependents with no dollar limit
- Household furnishing and appliances up to $13,150
- Tools and property used to earn a living up to the prescribed limit of $11,300
- One motor vehicle not exceeding a value of $6,600
- Equity in your home if that amount is less than $10,000
- RRSP and RRIF savings, except contributions made within the last 12 months
It’s important to note the values outlined above are based on current resale values – not the original value of the assets. For example, when estimating the value of your car, your creditors will consider depreciation, wear and tear, etc. to determine the as-is value. Also, please keep in mind, if you are a business owner, this list may look different. But, we’ll be happy to help you navigate that situation, should it present itself.
We understand how much your assets mean to you – not just in terms of their monetary value, but the comfort they provide and the personal meaning they hold for you and your family. That’s why, we want to provide you with fulsome, non-judgmental debt insolvency support to make this process as easy to cope with as possible.
If your debts are piling up and you are considering filing for bankruptcy, please give us a call and let us help you explore your financial options in a way that minimizes what you may have to sacrifice in order to reestablish your financial stability.