Do You Need to Give Up Assets for a Consumer Proposal?
Fortunately, if you file for a consumer proposal, you do not need to give up any assets, including your house or car. The ability to keep your assets is one of the reasons why a consumer proposal has such an appeal.
If you file for bankruptcy, you do not need to give up all of your assets either. Bankruptcy exemptions exist for reasonable living expenses and to enable you to earn a living still—they are not a disciplinary process.
Bankruptcy is governed federally by the Bankruptcy and Insolvency Act, which defines three kinds of exemptions:
- The property you hold in trust for other persons.
- GST credit payments and prescribed payments relating to your family’s essential needs; and
- Other exempt property as defined by the province or territory where you live.
Alberta has an exemptions list in the Civil Enforcement Act. This outlines which of your assets and how much equity you can keep. The Civil Enforcement Regulation sets out additional exemptions.
(Don’t miss this post next: When Should You File for Bankruptcy in Alberta?)
Which Assets Stay Protected in a Bankruptcy?
Depending on your circumstances, the following exemptions may apply:
- Food required for you and your dependents for the next 12 months
- Clothing for you and or your dependants up to $4,000
- Household furnishings and appliances up to $4,000
- One motor vehicle up to $5,000
- Tools of your trade up to $10,000
- Medical and dental aids for you or your dependents, with no limit
- Your principal residence (including a mobile home) up to $40,000. However, if you co-own your home, this amount is reduced based on how much of the home you own
- Social allowance, handicap benefit, or a widow’s pension as long as the proceeds from the payment are separate from your other funds
- Registered plans, including RRSPs, RRIFs, RESPs, pensions, RDSPs, DPSPs (except for contributions made in the last 12 months). Note: transfers between registered plans are exempt, but payments made from these plans are not exempt
- Certain life insurance policies
- If your primary occupation is farming, up to 160 acres of land if your principal residence is located on that land and is part of your farm
- If your primary occupation is farming, any personal property necessary for farming operations over the next 12 months; and
- Sentimental items, including pets.