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I need to file for bankruptcy in Toronto, but I can’t afford to lose my car!

A lot of people that I meet with in our Toronto office feel that their car is a necessity, used to get to work and make a living. Essentially their cars are not an asset they can afford to lose.

During a bankruptcy proceeding, though, you are required to hand over certain assets to your trustee to sell in order to pay your creditors. Your car is one of the assets that are considered. But before you start to worry about losing your car, remember the following things:

-You need to own your car outright. You can only hand over assets that you own, not ones that you lease or have used as security for a loan. If you drive a leased car, or your car is financed, then you technically don’t own the car, and therefore you don’t have to hand it over to the trustee.

-Your car has to be worth more than $6,600. You are allowed to own a car valued up to $6,600 according to Ontario law. If your car is worth less, you get to keep it. If it is worth more, than you need to pay the difference to your trustee. For example, if your car was worth $7,000, then you would owe your trustee $400 if you wanted to keep your car. Your trustee will help you work out a schedule of repayment if you end up owing money.

When you meet with me, we’ll discuss your assets, including any and all vehicles you currently own. You will need to get each vehicle appraised by a mechanic or a car dealer, so that we can determine the value of the car. Unfortunately, the black book value will not be accepted, as it is only a guideline and can very often be inaccurate.

You also need to remember that the exemption applies to only one vehicle, not multiple vehicles, even if in total they are worth less than the exemption. For example, a woman I met with recently owned two vehicles – a minivan and a smaller car. When she got both appraised, we discovered that the minivan was worth $1,000, and the car was worth $3,500. Together, her vehicles were valued at $4,500, under the allowed amount. Unfortunately, though, she can’t use the total value of both cars. By law, she will only be allowed to own one car under the set amount.

But what happens if you do own two cars and you need both? In the case of the woman, as with every multi-vehicle situation I deal with, we accepted her more expensive vehicle, the small car, as her primary car, and her less-expensive van as her second vehicle. In this way, she only had to pay $1,000 to me, her trustee, in order to keep both vehicles. If you own more than one car, we will try to work out the best payment scenario for you and your family.

In cities like Toronto, where many people use cars to commute to and from work, it’s hard to imagine life without a car. If you are experiencing financial difficulty and are worried about what will happen to your car, please do not hesitate to contact us at 310-PLAN. We can answer your questions and give you peace of mind about your financial future.


Sandra Sykora

Sandra is a Licensed Insolvency Trustee in our Toronto Yonge & Bloor and Toronto Downtown offices. Sandra is passionate about getting to know her clients, taking the time to help them find solutions that meet their needs and help them develop life long skills to remain debt free.