Section 67 of the Bankruptcy and Insolvency Act (BIA) specifies that all property of the bankrupt at the date of the bankruptcy, wherever situated, is part of the property divisible among his creditors. The same applies to the property that the bankrupt may acquire, or be devolved on, between the dates of the bankruptcy and of the discharge.
This same section 67 stipulates however that the following property is exempt from seizure:
- Property held in trust.
- Goods and services tax credits that are made to the bankrupt, subject to some restrictions and in prescribed circumstances.
- Property in a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF) other than contributions to any such plan or fund made within 12 months of the bankruptcy.
- Any property that as against the bankrupt is exempt from seizure under any laws applicable in the province within which the property is situated and within which the bankrupt resides.
Property exempted from seizure in Québec and in Ontario
Provinces have established some complementary requirements over and above the provisions on property exempt from seizure as specified in section 67 of this act.
Hence, in Québec, the trustee in bankruptcy must also comply with sections 2648 and 2649 of the Civil Code of Québec (CCQ), as well as with sections 552 and 553 of the Code of Civil Procedure (CCP). The latter code will be subject to amendments (bill 28), which will come into force in 2015.
Property exempt from seizure in Ontario is detailed in section 2 of the province’s Execution Act.
The following table briefly details the property presently exempt from seizure in Québec, as well as changes to come, based on the amendments foreseen in bill 28. The Ontario situation is also described for comparison purposes.
| Present situation Québec | Bill 28 Québec | Present situation Ontario |
|---|---|---|
| Movable property up to a value of $6,000 | Movable property up to a value of $7,000 | Movable property up to a value of $11,300 |
| Work instruments (needed for the exercise of the debtor’s professional activity) | No change | Work instruments (needed for the exercise of the debtor’s professional activity) up to a value of $11,300 |
| Motor vehicle, if it is a work instrument1 | Motor vehicle whose value is less than $10,000, if it is necessary in order to maintain work income or an active job search, or if it is necessary in order to meet the basic needs of the debtor and the debtor’s dependants or to ensure that they receive the care required by their state of health or that they can pursue their education | Motor vehicle whose value is less than $5,650 |
| Property declared by the donor or testator to be exempt from seizure, in accordance with certain provisions2 | No change | Property declared by the donor or testator to be exempt from seizure, in accordance with certain provisions |
| Things needed in order to compensate for a handicap | No change | Things needed in order to compensate for a handicap |
| Insurance benefits, if the beneficiaries are the bankrupt’s children or relatives, or his (her) married or civil union spouse (section 2457 of the CCQ) | No change | Life insurance, if the beneficiaries are the bankrupt’s children or relatives, or his (her) married or civil union spouse |
1As for the motor vehicle that the bankrupt needs to perform his work, under the current jurisprudence, the following five points must be considered in order to rule on its seizability:
- Is this motor vehicle a work instrument?
- Is it an instrument needed to perform the work?
- Is it used for the personal exercise of the debtor’s activities?
- Are these professional activities?
- Is there also an employer-employee relationship?
When in doubt, it would be recommended to the debtor to bring before the court, at his own expense, a motion requesting it to rule and confirm that the motor vehicle, because of its specificity, is actually a work instrument.
2About the property declared by the donor or testator to be exempt from seizure, it is worth mentioning that, to be valid under the current doctrine and jurisprudence, an exemption from seizure stipulation must comply with the following provisions:
- The stipulation is made in an act by gratuitous title.
- It is temporary.
- It is justified by a serious and legitimate interest.
- It is registered in the appropriate register, i.e. the Register of personal and movable real rights, or the Quebec land register.
The amendments to the CCP reproduce in essence the provisions of section 553 currently in force. The table shows only some elements that could have an impact on the practice.
Other regulations pertaining to property exempt or not from seizure
In Québec, the CCP provisions on the garnishment of wages do not apply in the case of a bankruptcy because section 68 of the BIA, as well as the directive no. 11R2 of the Office of the Superintendent of Bankruptcy Canada, specify the portion of the bankrupt’s income that should be paid to the bankrupt’s estate. The same applies to bankruptcies occurring in Ontario.
Amounts received by the bankrupt as a gift or an inheritance, or as any other windfall, are excluded under section 68, and are therefore seizable (unless otherwise stipulated).
Sums paid to the bankrupt as compensation for physical damage or injury to reputation are also excluded from the assets subject to be realized by the trustee.
This bulletin merely provides an overview. The exemption from seizure being the exception, we must therefore refer to the rules applicable when the debtor files for bankruptcy. For any question on the subject, we invite you to contact a Ginsberg Gingras trustee in bankruptcy. Our trustees will make use of all our expertise and experience to answer any question you or your clients may have.