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How Changes in Ontario Bankruptcy Exemption Laws Help Homeowners

“Can I keep my home?” It’s one of the most frequent questions people ask us when they’re considering bankruptcy as a solution to their debt problems. Generally, the answer is yes — but it does depend on how much equity you have in your house. In order to keep your home when filing for bankruptcy, you must be able to pay out all of your home equity to the Trustee. The money that the Trustee collects is used to pay toward your debts – that is what bankruptcy is. How to keep their home is a big concern for most people.

In a bankruptcy, certain assets are protected – they can’t be taken by the Trustee. As of December 1, 2015 the newly-defined exemption for a principal residence (or a home) has increased from $0 to $10,000. Simply put, this exemption means that when you file for bankruptcy in Ontario, $10,000 of your home equity is protected. That is $10,000 you save that would otherwise be payable to your creditors. This is reassuring news for many people seeking relief for overwhelming debt.

The Executions Act is the law that protects certain assets of individuals when creditors have started a legal action to collect a debt. On December 1, 2015 the assets that are protected and the amount of protection available changes. The changes are summarized below:

Ontario-ExemptionBlog-Chart

Homeowners in other provinces have benefited from this type of exemption. Originally, the exemption was put in place to protect western farmers from losing their farms to eastern banks. The exemptions have continued and are now a fixture in certain provinces.

Should you wait until December 1 to file for bankruptcy?

What does this mean to you if you are a homeowner who is considering bankruptcy? If you have equity in your home, and you plan to keep it, you should consider waiting. The exemption is not in effect until December 1 and exemptions are claimed as they exist on the date of bankruptcy.

Speak to a Trustee in Bankruptcy

If you’re unsure whether bankruptcy is the right solution for your debt problems, it’s important to speak to a Trustee in Bankruptcy, who can help you understand how your home equity is calculated. A Trustee will review your financial situation and explain all your options for debt relief. For example, if you’re considering a consumer proposal vs. bankruptcy, the Trustee will compare the two options, taking into account the new home equity exemption. If bankruptcy is the right solution for you, it may be appropriate to wait until the new exemption is in effect. However, a consumer proposal could be started immediately.

These changes represent a significant step forward in protecting homeowners with minimal home equity in Ontario.



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