B.C. Bankruptcy Exemptions, no more.

By Greg Best: Greg Best is a trustee in bankruptcy located in Vancouver, BC.

It has long been accepted that the exemptions set out in the Court Order Enforcement Act of British Columbia applied to individuals seeking relief from their overwhelming debt by making an assignment in bankruptcy. Often, bankruptcy is a last resort for many hard working British Columbians, who have no other alternative to deal with their creditors. The Court Order Enforcement Act allowed you to keep certain assets to help rebuild your life after bankruptcy.

Bankruptcy trustees have routinely advised individuals in financial difficulty, that if you go bankrupt in B.C, you will be able to protect certain assets from your creditors. It was understood that you could keep up to $12,000 equity in your home and $5,000 equity in your vehicle if you went bankrupt.

That all changed on November 17, 2010 when the B.C. Supreme Court rendered its decision in Thow (Re) (Exemptions from Seizure), 2010 BCSC 1561. Although this decision relates to a bankrupt that cannot be described as honest or unfortunate; it affects all those individuals that I deal with that are honest and unfortunate, and simply looking for a fresh financial start.

The Court found, on a very strict interpretation of the applicable legislation, that the exemptions set out in the Court Order Enforcement Act of British Colombia, only apply if the value of the asset does not exceed the exempt amount. That is: if the value of your home, or car, is greater than the exempt amount (ie: $12,000, or $5,000), you are not entitled to any exemption in a bankruptcy.

Although there are many vehicles worth less than $5,000, I have not been able to find any homes in B.C. worth less than that.

What does all this mean?

If you make an assignment in bankruptcy in B.C., you will lose the right to retain up to $34,000 in equity. This is a significant issue and will affect many honest unfortunate people in financial difficulty trying to get a fresh start.

What can be done?

The appeal periods have expired and this decision is now considered the law in B.C. It is up to the Provincial Government to consider amending the relevant legislation to reflect its true intent and the spirit of the exemptions.

Until the legislation is changed, you must consider how these changes will affect you. You may want to consider making a consumer proposal instead. Although the equity you have in your car and home is a factor in determining the terms of a consumer proposal, you are generally able to retain all of your assets.

Trustees: Publish your Articles on Canada’s #1 Website.

Related Topics:

BC Bankruptcy Exemptions;

Thow Court Decision;

Exemptions, Exemptions, wherefore are Thow? (with apologies to Shakespeare) – An analysis of the November 17, 2010 BC Court Decision in which the decision throws doubt on how exemptions under the BC Court Order Enforsement Act have been handled heretofore. – by Kimberly S. Campbell, Barrister and Solicitor (December 20, 2010).

This entry was posted on Sunday, March 27th, 2011 at 12:52 pm and is filed under Trustee Blogs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.