September 5, 2017

Keep your house when you go bankrupt.

Whether or not a home owner could keep his/her house when considering bankruptcy has always been a major concern for Ontarians.  Unlike some other provinces the Ontario Execution Act has never provided a homestead exemption.

This is important because the spirit of our insolvency legislation is to provide honest debtors with relief from the burden of debt.  Make no mistake about it debt can be an awful burden for many people.  If someone has equity in their house on filing for bankruptcy they either end up making settlement with the trustee for the value of that equity or end up refinancing or selling their home to liquidate the value of the equity.

Such actions, while to some may appear morally just, can result in the debtor incurring higher housing costs and puts them at risk of getting back into trouble with new debts.  The idea of  a homestead exemption is to protect the family home by allowing the debtor to retain a certain capped value in their residence.

In Alberta the cap is $40,000, in our view it should be a fixed percentage rather than a dollar value because of the variance across the province in house values.  However, what we have is better than nothing.  Effective December the 1st of 2015 the Ontario Execution Act will be amended creating a homestead exemption of $10,000 on a principal residence.  The exemption will be far more beneficial to people living in remote areas than those living in major urban areas.