What happens to my car if I go bankrupt?
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 if you go bankrupt?
In Ontario (the rules are different in every province) is that you are allowed to keep your car if you go bankrupt, provided your car or truck is worth less than $5,650, and there are no loans or liens registered against it. If your motor vehicle is worth more than $5,650, you would be required to pay to the trustee the amount over that limit. For example, if your car is appraised at $8,650, you would be required to pay $3,000 into your bankruptcy estate to keep your car when you go bankrupt.
If 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. It is up to the lender to decide whether or not you can keep your vehicle (and keep paying the loan on the vehicle).
Some lenders don’t care if you are bankrupt or not; if you are making your payments, they allow you to keep your vehicle. Others will take your vehicle when you go bankrupt, even if your payments are up to date.
Which lenders do that? The list changes regularly as bank’s collection policies change, so we recommend that you contact Ontario bankruptcy trustee for more information, and to arrange a free initial consultation.
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. Again, your Ontario bankruptcy trustee can help you analyze your situation and help you decide whether or not to keep your car in a bankruptcy in Ontario.
