Many people hold off considering a bankruptcy because they are afraid of losing their car.  When you are struggling to pay down debt, it is understandable that you don’t want to jeopardize your ability to drive to work to earn an income.  A trustee is only concerned with assets that have a realizable value.

The below summarizes what can happen to your vehicle if you file an assignment in bankruptcy:

  • If your personal automobile is worth less than the Ontario exemption for a vehicle of $7,117, then your trustee will not touch your vehicle.
  • If your vehicle is worth more than the personal exemption, you can pay the trustee the excess over a period of time. So, if your car is worth $8,500, the first $7,117 would be exempt and you could pay the trustee the difference of $1,383 in monthly payments.
  • If you require your vehicle to perform your work (self-employed or your employer provides a letter and a T2200 is issued) there is an additional exemption of $14,405 to cover all your tools of the trade which can include your vehicle.
  • If your vehicle is worth less than a secured loan that is registered against your vehicle (lease or financing) then your trustee will not touch your vehicle. If your payments are current, you can keep your vehicle and continue the payments with the secured lender.  If you are in arrears on your payments, it is best to bring the payments current before filing for bankruptcy if you want to retain the vehicle.
  • Alternatively, if the vehicle is worth significantly less than the balance owing or you just can’t afford the payments, you can surrender your vehicle to the secured lender and any shortfall would be discharged in your bankruptcy. You will want to consider the effect on any co-signors before doing this.

The initial assessment with Taylor Leibow Inc., Fresh Start Now is always free of charge to discuss your financial situation and explain your options. Don’t delay in taking the first step of calling us – you can eliminate your debt and potentially keep your vehicle. Call us today at 1-888-287-2525

Kathy portraitBy Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency
and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)