In Winnipeg and throughout Manitoba, having the use of a car or truck may be essential for you to get around and get to work. Many people are worried that they will lose their vehicle if they file personal bankruptcy.
In Manitoba (the rules are different in every province), if you file for bankruptcy, you are allowed to keep one motor vehicle with a value of up to $5,650, provided there are no loans or liens registered against it.
If your motor vehicle is worth more than $5,650 (and there are no loans or liens registered against it), you would be required to pay the Trustee the amount over that limit. For example, if your car was appraised at $7,650, you would be required to pay $2,000 into your bankruptcy estate, to keep your car when you file for bankruptcy.
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 Bankruptcy Trustee will not take your vehicle. It is then up to the lender to decide whether or not you can keep your vehicle by continuing to make the loan payments on the vehicle.
Some lenders are not concerned if you file for bankruptcy, as long as you continue to make your monthly payments. However, others may take your vehicle on the filing of a bankruptcy, even though your payments are current. The lenders' collection practices continually change, so we recommend that you contact a Manitoba Bankruptcy Trustee for more information and to arrange a free initial consultation.
If you are currently leasing a vehicle and you declare bankruptcy, will you lose your leased vehicle?
In most cases, the answer is no, you will not lose your leased vehicle if you go bankrupt. However, most of today's vehicle leases have standard insolvency clauses that allow the lender the option to repossess your vehicle in the event of a bankruptcy, regardless of whether or not your payments are current. The reality is that most lenders don't want your car, but instead would rather continue to receive your monthly payments. However, if your vehicle payments are in default then the lender will likely choose to seize your vehicle.
Can you afford to keep your vehicle?
Whether you have a car loan or lease there are monthly payments that must be made to keep your vehicle. You need to carefully examine your situation in order to determine if keeping your vehicle makes financial sense. If you are going bankrupt because you have accumulated debt as a result of more money going out every month than is coming in, then you need to reduce your monthly expenses. One option is to surrender your vehicle and eliminate your monthly loan/lease payments, which will then make it easier every month and any resulting shortfall in the loan/lease will be included in your bankruptcy. You can see that this is a complicated area, so if you own a vehicle and are considering filing for bankruptcy you should contact a Manitoba Trustee to discuss your options prior to surrendering your vehicle.
A final thought to consider is that if you own a vehicle with a value greater than the exemption of $5,650, rather than going bankrupt and losing it, you may want to file a consumer proposal so that you can keep your vehicle.
Our Grant Thornton professionals can help you address your concerns as they relate to your vehicle in both a bankruptcy or consumer proposal.