What Are Exempt Assets In Bc

What are Exempt Assets In B.C.?

Filing for bankruptcy can be daunting. Many people fear they will lose absolutely everything. The good news is, that’s not the case. When you file for bankruptcy, some of your assets are protected from being seized by the creditors. This means, the assets are ‘exempt’ and you can keep them.

Each Province has its own exemption legislation. In British Columbia the applicable law is the Court Order Enforcement Act and Regulations (COEA).

Here are the amounts of equity you can protect in exempt assets in British Columbia (per person):

• Clothing
• Medical aids
• Household furnishings and appliances - $4,000 (at quick-sale price, not retail or replacement cost) Motor vehicle - $5,000 equity in one motor vehicle (reduced to $2,000 if you owe money for child or spousal support) It’s the equity you have in the vehicle that matters, not the value of the vehicle You cannot transfer any unused exemption room to a second vehicle.
• Principal residence - $9,000 (it’s $12,000 if your residence is in the Capital Regional District or the Greater Vancouver area).
• Tools of the trade - $10,000 (tools that you use to earn income). A second vehicle may be a tool of the trade, but not all vehicles fall under this exemption.
• Life insurance Policy Cash Surrender Value (CSV) when the named beneficiary is a preferred beneficiary (parent, spouse, child or grandchild).
• Registered Pension Plans (RPP) with the exception ofover-contributions.
• Locked-In Registered Retirement Savings Plans (RRSP).
• Registered Retirement Savings Plans (RRSP) that are invested in a segregated fund with a life insurance company.
• Registered Retirement Savings Plans (RRSP) contributions made more than one year before the date of bankruptcy (or the initial bankruptcy event) calculated on a first-in first-out basis.
• Deferred Profit Sharing Plans (DPSP) contributions made more than one year before the date of bankruptcy (or the initial bankruptcy event) calculated on a first-in first-out basis.

How the equity in an asset is calculated

1. What is fair market value of the asset (what would it sell for if you sold it right now)?

2. Is the asset security for a loan or a mortgage? If yes, what is the amount of the loan?

3. Subtract the amount of the loan form the value of the asset. This is the ‘gross equity’.

4. Divide the gross equity by the number of owners - the result is your gross equity in the asset.

5. Now deduct the applicable exemption amount from the gross equity. The result in the equity available to your creditors.

What happens if there is equity in the asset above the protected amount?

If you want to keep the asset – here are some examples of what you can do:

1. Make a lump-sum payment to the Trustee that is equal to the equity available to your creditors.

2. Discuss a payment arrangement with the Trustee if monthly payments are possible until you have paid back an amount equal to the equity available to your creditors.

3. Have a family member make a lump-sum payment equal to the equity available to your creditors.

4. Have a family member purchase the asset from you and remit the equity to the Trustee.

You don’t want to keep the asset or you cannot afford to pay to keep the asset:

1. The Trustee may ask you to deliver the asset to their office or to another location so the asset can be sold.

2. The Trustee may arrange for the asset to be picked up by another party.

3. You will receive funds from the sale of the asset after the asset has been sold and after all seizing and selling costs have been deducted. You are eligible to receive up to the maximum exempt amount if it is available from the proceeds.

4. If the asset sells for less than expected or the selling and seizure costs are higher than expected you may not receive the full exemption amount.

Contact your local MNP Licensed Insolvency Trustee to learn more about which of your assets would be exempt in a bankruptcy.