Exempt vs. Non-Exempt Assets

Exempt vs. Non-Exempt Assets
stevewelker 13.11.2014
appliances assets automobile bankruptcy car Consumer Proposal debt exempt furniture insurance non-exempt RRSP

Exempt vs. Non-Exempt; What the heck does that mean?  In Ontario, certain assets are exempt from seizure or judgment proof.  Ontario is an organized place.  We have a system for people to collect their debts.  The first step is for a creditor to seek a judgement from a, you guessed it, judge.  Once the judgment is obtained, the next step is to enforce it and turn that legal piece of paper into money.  The most common ways to enforce a judgement are to garnish the debtor’s wages or obtain a writ of seizure and sale of personal property or land.
To protect debtors, the people who owe money, the province declared certain assets exempt from seizure.  In other words, creditors cannot attack certain assets.  These same assets are exempt from creditors if you decide to file an assignment in bankruptcy or consumer proposal.
These exemptions are contained in the Bankruptcy and Insolvency Act, Executions Act of Ontario, and Insurance Act of Ontario. The exempt assets are:

  • Furniture and Appliances valued at less than $14,180
  • Tools of the Trade valued at less than $14,405
  • Unlimited necessary clothing and apparel
  • Vehicle equity valued at less than $7,117 (eg. $50,000 vehicle with $43,00 loan equals $7,000 equity and is exempt)
  • RRSPs and Pensions contributions that are more then 12 months old
  • Insurance Policy Cash Surrender Value where the spouse, child, grandchild or parent

Non exempt assets include stocks, bonds, mutual funds, TFSAs, RESPs, homes, campers, and land to name a few.
If your asset is worth more than the limit of the exemption and you declare bankruptcy then you have two options:
1) Surrender the asset and have your Licensed Insolvency Trustee return the amount of the exemption to you in cash; or
2) Pay into your estate the amount by which your asset’s value exceeds the limit of the exemption.
No assets are surrendered when filing a consumer proposal.

For more information on exempt vs. non-exempt assets, or to have your situation reviewed by a Licensed Insolvency Trustee for free, give us a call.  You’ve got nothing to lose except your debt!