Bankruptcy without losing your car, is it possible?

Car loan or lease

The Bankruptcy and Insolvency Act aims to promote the financial rehabilitation of individuals. Therefore, as long as you respect the terms of your contract, the law prohibits the creditor who has a security interest from taking back the asset.

However, if your car payments have become too expensive for your budget, if you are faced with big fees upon returning your leased car, or if the car’s value is significantly lower than the amount you owe, the Bankruptcy and Insolvency Act allows you to return the keys to the creditor. You can thus free yourself from any financial responsibility.

Note that you must make this decision when filing your bankruptcy or proposal and you cannot change your mind later. Indeed, when filing your case, if you decide to keep your car, you will subsequently be responsible for obligations as if you had not declared bankruptcy.

Fully paid-off car

If your car is fully paid off at the time of bankruptcy, 3 situations may occur:

1. The Code of Civil Procedure provides that in certain situations, your car cannot be seized by a creditor or the trustee. If you meet these conditions, you can keep your car as long as the value does not exceed a certain amount.
2. Depending on the value of the vehicle, it may be possible for you to buy it back from the trustee. You can pay this amount over the duration of the bankruptcy or longer, with the creditors approval.
3. The vehicle will be sold by the trustee at the auction and the proceeds of the sale will be distributed to your creditors.

At your 1^st meeting, we will analyze your financial situation and provide you with all your options and details concerning what is discussed here.

The same principle applies to your other assets, such as a house. As you can see, it is very common to declare bankruptcy and be able to keep your car or other assets. For any questions or advice regarding your finances, do not hesitate to contact our professionals. Consultation can be done remotely or in person, according to your preference. It’s free, confidential, and without obligations.

By Pierre Fortin
Jean Fortin & Associés
Personal Finance Advisor
Licensed Insolvency Trustee