Unless you live in a city with access to public transit, a car or truck may be essential for you to get to work. So what happens to your car if you go bankrupt in Ontario?
Exemption Limits For Your Car
In Ontario (the rules are different in every province), bankruptcy exemptions permit you to keep your vehicle if you go bankrupt, provided your car or truck is worth less than $7,117, and there are no loans or liens registered against it.
If your motor vehicle is worth more than $7,117, you would be required to pay to the trustee the amount over that limit. For example, if your car is appraised at $8,117, you would be required to pay $2,000 into your bankruptcy estate to keep your car when you go bankrupt.
Secured Car Loans or Leases and Bankruptcy
If you lease a car, or there is a loan or lien registered against your vehicle, and if the loan is for as much as the vehicle is worth, the trustee won’t take your vehicle. You have two choices:
- If your payments are up to date, you may continue to make your payments and keep your vehicle in accordance with the terms of your original loan or lease.
- Your other choice (whether the payments are up to date or not) is to stop making the payments and surrender the vehicle to the lender. If you stop making payments prior to filing bankruptcy and surrender the vehicle, any resulting shortfall will be included in your bankruptcy.
Can You Keep Up With the Payments?
If you have expensive car payments each month, and if those payments are the cause of your financial problems, it may be wise to surrender the car to the lender before you go bankrupt, even if your payments are up to date. Bankruptcy should be a fresh start, and keeping high car payments may not be a fresh start for you.
Your Ontario bankruptcy trustee can help you analyze your situation and help you decide whether or not to keep your car if you file for bankruptcy in Ontario.