Assets You Can Keep During Bankruptcy in Ontario
Filing for bankruptcy in Ontario is scary — especially when you’re not sure what happens to your home, your car, or the things your family depends on every day. The good news is that bankruptcy does not mean losing everything. Ontario law protects a range of essential assets so you can keep living, working, and rebuilding your life.
Below, we’ll walk you through exactly which assets are protected during bankruptcy in Ontario, what the current exemption limits are, and what alternatives exist if you have assets you want to keep. If you’re feeling overwhelmed by debt and unsure where to turn, this guide will give you the clarity you need to make an informed decision.
Ontario’s bankruptcy exemptions protect your clothing, household furnishings (up to $17,091), tools of the trade (up to $17,362), one vehicle (up to $8,578), home equity (up to $10,783), and most RRSP savings. You don’t lose everything — and a consumer proposal lets you keep all your assets while still reducing your debt.
What Are Bankruptcy Exemptions?
Bankruptcy exemptions are legal protections that allow you to keep certain assets when you file for bankruptcy. In Canada, bankruptcy is governed by the federal Bankruptcy and Insolvency Act (BIA), but the specific exemptions — what you’re allowed to keep and how much — are set by provincial law. In Ontario, these limits come from the Ontario Execution Act.
The purpose of these exemptions is straightforward: even though bankruptcy is meant to help resolve your debts, the law recognizes that you still need the basics to live and earn a living. That’s why items like clothing, household goods, and work tools are protected up to certain dollar amounts.
Anything that falls outside these exemptions — or exceeds the dollar limits — becomes part of your “bankruptcy estate.” Your Licensed Insolvency Trustee (LIT) may sell those non-exempt assets, or you may have the option to “buy back” the portion above the exemption limit if you want to keep them.
Ontario Bankruptcy Exemptions at a Glance
Here are the current exemption limits set by Ontario’s Execution Act. These amounts are based on the resale value of your assets on an as-is basis:
RRSPs are fully exempt except for contributions made in the 12 months before filing. TFSAs, RESPs, and non-registered investments are not protected.
These exemption amounts are reviewed periodically and can change, so it’s important to confirm the current limits with a Licensed Insolvency Trustee before making any decisions.
Pros and Cons of Bankruptcy in Ontario
Who Should Consider Bankruptcy — and Who Shouldn’t
- Have mostly unsecured debt (credit cards, personal loans, payday loans) that you genuinely cannot repay
- Own few or no assets above the Ontario exemption limits
- Are facing active collections, lawsuits, or wage garnishments that are making daily life unmanageable
- Have a modest income and want the fastest possible path to a fresh start
- Have already tried budgeting and credit counselling without success
- Own a home with significant equity above the $10,783 exemption
- Have assets like a TFSA, RESP, or valuable property you want to protect
- Earn a high income that could trigger large surplus income payments
- Want to keep your credit rating as intact as possible
- Can afford to repay a portion of your debt through a structured debt relief plan
Financial Example: How Ontario Bankruptcy Exemptions Work
Let’s say you’re a single person in Ontario with $45,000 in credit card and personal loan debt. Here’s how the exemptions might play out:
In this example, you’d keep nearly everything and eliminate $45,000 in unsecured debt. The only loss would be the $3,500 TFSA. That’s the power of Ontario’s exemption system.
Step-by-Step: The Bankruptcy Process in Ontario
- Book a free consultation with a Licensed Insolvency Trustee. This is the only professional legally authorized to file a bankruptcy in Canada. They’ll review your finances, explain your options, and help you decide if bankruptcy is the right path. There is no cost for this initial meeting.
- Complete a financial assessment. Your LIT will review all your assets, debts, income, and expenses. They’ll identify which assets are exempt under Ontario law and explain what happens to everything else.
- File the bankruptcy paperwork. Your trustee prepares and files the official documents with the Office of the Superintendent of Bankruptcy. The moment the filing is registered, an automatic stay of proceedings takes effect — stopping collections, garnishments, and most lawsuits.
- Attend two credit counselling sessions. These mandatory sessions help you build budgeting skills and understand how to manage money going forward. They’re typically held at your trustee’s office or online.
- Submit monthly income reports. Each month during your bankruptcy, you’ll report your income and expenses to your trustee. If your income is above the government’s surplus income threshold, you may need to make additional payments.
- Receive your discharge. For a first-time bankruptcy with no surplus income, discharge happens in 9 months. With surplus income, it extends to 21 months. Once discharged, your eligible debts are eliminated and you can start rebuilding your credit.
What About Your Home?
This is the question that worries most homeowners. Under Ontario’s Execution Act, your principal residence is exempt from seizure if the equity in your home does not exceed $10,783. Equity means the difference between your home’s current market value and what you owe on the mortgage.
If your equity is above that amount, it doesn’t necessarily mean you’ll lose your home. You may have the option to “buy back” the non-exempt equity — essentially paying the difference to your bankruptcy estate over time. Alternatively, a consumer proposal allows you to protect your home entirely while still reducing your unsecured debt. If you’re a homeowner considering bankruptcy, this is one of the most important details to discuss with your trustee.
What About Your Car?
Ontario allows you to keep one motor vehicle worth up to $8,578 based on its current resale value. If your car is worth less than that — which many used vehicles are — you keep it, no questions asked.
If your vehicle is worth more, you’d need to pay the amount above the exemption to your trustee, or surrender it. For leased or financed vehicles, the calculation is different: the loan balance is subtracted from the car’s value to determine the net equity. If you’re current on payments, you can typically continue your lease or loan.
RRSPs, Pensions, and Investments
Most registered retirement savings are protected during bankruptcy in Ontario. This includes RRSPs, RRIFs, Deferred Profit Sharing Plans (DPSPs), and employer pensions. The one exception: any RRSP contributions made in the 12 months before filing are not protected. This rule exists to prevent people from moving money into RRSPs right before filing to shelter it from creditors.
However, not all savings are treated equally. TFSAs, RESPs, and non-registered investment accounts are not exempt and can be claimed by your trustee. If you have significant savings in these accounts, a consumer proposal or other debt relief alternative may be a better option for protecting those funds.
Alternatives to Bankruptcy
Bankruptcy isn’t the only path to debt relief — and for many Ontarians, it may not be the best one. If you have assets above the exemption limits, a consumer proposal is often the smarter choice. In a consumer proposal, you negotiate to repay a portion of your total debt (often much less than the full amount), and you keep all of your assets — your home, your car, your TFSA, everything.
Other options worth exploring include debt management plans, debt consolidation loans, and informal creditor negotiations. The right choice depends on your total debt, your income, and which assets you need to protect. A Licensed Insolvency Trustee can walk you through all of your options in a free consultation — they’re required by law to explain every alternative before you file anything.
Bankruptcy in Ontario doesn’t mean losing everything. The province’s exemption system protects your clothing, household goods, one vehicle, work tools, and most retirement savings. If your assets fall within the limits, bankruptcy can eliminate your unsecured debts and give you a genuine fresh start — often in as little as 9 months. If you have significant assets to protect, a consumer proposal may be the better route. Either way, the first step is a free, confidential consultation with a Licensed Insolvency Trustee.
Ready to see if you qualify?
Will I lose my furniture and appliances if I go bankrupt in Ontario?
In most cases, no. Ontario’s bankruptcy exemptions protect your household furnishings and appliances up to a combined value of $17,091 based on their current resale value (not what you paid for them). Most people’s used furniture and appliances are worth well below this limit, so you’d keep everything. Only if you own particularly high-value items that push the total above the limit would a trustee look at selling or asking you to pay the difference.
What happens to my tax refund during bankruptcy?
When you file for bankruptcy, any tax refund owed for the year you file — as well as any outstanding refunds from prior years — typically goes to your Licensed Insolvency Trustee and becomes part of the bankruptcy estate. However, you continue to receive your Canada Child Benefit (CCB) and GST/HST credit payments, as these are not considered tax refunds. Your trustee will file two tax returns for the year you go bankrupt: one for the pre-bankruptcy period and one for the post-bankruptcy period.
Can I keep my RRSP if I file for bankruptcy in Ontario?
Yes, for the most part. RRSPs, RRIFs, and Deferred Profit Sharing Plans are protected under federal bankruptcy law, with one exception: contributions made in the 12 months leading up to your bankruptcy are not exempt. This means if you deposited $5,000 into your RRSP eight months before filing, that $5,000 could be claimed by the trustee. Contributions made more than a year before filing are fully protected. It’s worth noting that TFSAs and RESPs do not have this protection and can be seized.
How long does bankruptcy stay on my credit report in Ontario?
A first-time bankruptcy remains on your credit report for 6 years after your discharge date with TransUnion, and 7 years with Equifax. A second bankruptcy stays on your report for 14 years. During this time, your credit score will be significantly affected, making it harder (though not impossible) to qualify for new credit. Many people begin rebuilding credit shortly after discharge by using a secured credit card and making consistent, on-time payments. Within two to three years of discharge, many individuals can qualify for a mortgage or car loan.
Is a consumer proposal better than bankruptcy if I want to keep my assets?
In many cases, yes. The biggest advantage of a consumer proposal over bankruptcy is that you keep all of your assets — your home equity, vehicles, TFSAs, RESPs, and everything else. You negotiate a deal to repay a portion of your unsecured debt (often 30–50% of what you owe), typically over up to five years with no interest. A consumer proposal also has a shorter credit report impact — it’s removed 3 years after you complete it, or 6 years after filing, whichever comes first. The trade-off is that you pay more than you might in bankruptcy, but you get to keep what you’ve built.
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