When you file a bankruptcy petition in Canada, most of your property becomes part of the bankruptcy estate, which your Licensed Insolvency Trustee manages. The trustee may sell certain non-exempt assets to help repay your creditors.
However, not everything is lost. You are allowed to keep essential assets required to maintain a basic standard of living. These exemptions vary by province, but often include:
- Household furniture and appliances up to a certain value
- Necessary clothing
- Tools of your trade
- A vehicle, depending on its value
Non-exempt property, like a second vehicle, valuable jewellery, or investments, may be sold by your trustee. Additionally, any tax refunds not yet received for the year of bankruptcy (and prior years) will be collected by the trustee and applied to your debts.
Where you have an asset that is worth more than the loan and the exemption (if any) you can make an arrangement with the LIT so you can keep that asset (if you want) by offering to pay the bankruptcy estate the fair value that the LIT would otherwise get by selling the asset.