What are the non-seizable and seizable assets in personal bankruptcy?

One of the biggest concerns when considering bankruptcy is the prospect of losing one’s assets. However, contrary to popular belief, bankruptcy does not necessarily result in the loss of your assets. In fact, the law protects several categories of assets by making them what is referred to as “exempt from seizure”.

First, let’s look at the definition of exempt from seizure and seizable assets:

  • Exempt from seizure assets: Assets that cannot be seized under the law by a trustee or another creditor.
  • Seizable assets: Assets that can be seized and validly subjected to civil enforcement proceedings, even if held by a 3rd party.

What assets are protected in the event of a bankruptcy?

Several assets can be retained in personal bankruptcy as per the provisions of Sections 694 to 701 of the Quebec Civil Code of Procedure, such as:

  • Your car: If it is financed and you are up to date on your payments, you will be able to keep it. Under certain circumstances or pursuant to a specific monetary agreement, a fully paid-off car can also be retained. Your Trustee will be able to give you specific details depending on your situation.
  • Your home: You can keep It if it has little or no equity, meaning if the value is less than or equal to the balance owed to the creditor, and if you are up to date on your mortgage.
  • Your furniture: You can keep them if they furnish your principal residence and are used for household needs, up to a liquidation value of $7,000.
  • Your tools: If they are necessary for carrying out a professional activity, they can be retained.
  • Your clothing: They can be preserved if they are necessary for the household’s daily life.
  • Your pet: Since animals are not considered property, you can keep your faithful companion.
  • Tax refunds: The provincial tax refund is exempt from seizure under law. Unfortunately, the federal refund will be subject to seizure for the year of bankruptcy as well as for any previous years.
  • Your RRSPs and other pension funds: The law exempts all RRSPs except contributions made within 12 months of the date of your bankruptcy. Pension funds are entirely exempt. However, TFSAs, TFSAAPPs, and RESPs are subject to seizure in bankruptcy but not if you opt for a consumer proposal.
  • An inheritance: An inheritance: Any property or sum of money received as an inheritance can be retained if the will contains the clauses required by law to render it exempt. Only a lawyer or notary can confirm the exempt status (or not) of an inheritance.
  • Your CNESST and disability insurance benefits: They are exempt. However, the income must be taken into account in your budget to determine your mandatory monthly contribution during the bankruptcy period.

Since this list is exhaustive, we recommend booking an appointment for a free evaluation of your personal situation or asking questions to an insolvency advisor.

What are the seizable assets in bankruptcy?

In the event of bankruptcy in Quebec, certain assets can be seized to repay creditors. Here is an exhaustive list of assets generally considered seizable:

  • Home with equity: Real estate if the value is significantly higher than the mortgage balance. In such a case, an agreement can be reached between the trustee and your creditors so that you or a close relative “buys back” the equity value in a lump sum or over several months or years.
  • Certain high-value personal belongings: This may include precious jewelry, expensive artworks, or other items of considerable value.
  • Bank accounts and investments: Funds held in bank accounts and investments can be used to repay creditors, except in cases where they are specifically protected by law.
  • Vehicles: If you own luxury or recreational vehicles, they could be seized to repay debts.
  • Some recently acquired assets: If you have made significant transfers or purchases shortly before declaring bankruptcy, these assets could be closely examined and seized to repay creditors, especially if they are considered an attempt to conceal an asset.

Every case is unique. If you are considering bankruptcy, it is highly recommended to consult a professional in insolvency at Jean Fortin & Associés or a lawyer or notary for advice tailored to your personal situation.