Protection of certain property from civil judgements

Factual Questions
1

In this thread it was pointed out that California and Florida protect pensions and homes (respectively) from being seized for satisfying a civil judgment.

Elendil’s Hair was kind enough to provide the rationale behind this (which in the case of OJ Simpson seems a pretty egregious miscarriage).

Now, my impression in Canada was that no such protection exists - e.g., when I started my small business, I was advised by my lawyer to incorporate specifically so I wouldn’t quote/unquote loose my house which was the only real asset my wife and I had at the time.

So I’m curious, am I correct that in Canada, we don’t have these “protections” or “shelters” (depending on which side of the judgment you’re on!) And more widely, do most countries protect homes and pensions or do most not?

In case it’s not obvious, this is not seeking legal advice and no, I don’t need the answer fast.

2

We do have them in Canada, usually in a provincial statute called the Exemptions Act or something similar.

However, the point is that the exemption normally only applies up to a certain monetary value, so if the total value of your house is more than the exempt value, a creditor can try to attach the non-exempt portion of the house. Whether they can force a sale of the house, or simply register the claim against title and wait until you sell it, will vary from jurisdiction to jurisdiction.

And, this post is not intended as legal advice, but just to comment on a question of public interest. If you are interested in getting legal advice on this point, you should talk to a lawyer who practices in this area of the law, which I do not.

3

This can depend on jurisdiction. Here in Alberta, we find our exemptions in the Civil Enforcement Act, and the associated Regulations. The OP would do well to find out what the legislation is called in his or her jurisdiction.

No, has been pointed out, protections exist. You’re asking about a slightly different scenario here–incorporation protects you, personally, from debts incurred by your corporation. No such protection exists if you establish the business as, say, a sole proprietor. However, if you personally (that is, you, not your corporation) rack up debts you cannot pay, then your house can be seized, in spite of any corporation that you may own. Subject to conditions and exemptions such as Northern Piper has pointed out, of course.

Again, this is general information only, about a couple of rather complex areas of law. For advice specific to your situation, I’d suggest consulting a lawyer who works mostly or only in these areas, in your jurisdiction.

4

The problem with the Florida law is that it protects the primary residence with no limits. SO OJ or some financial shyster can relocate to Florida, declare bankruptcy, and keep their $20M house while cancelling their debts. Not sure if there is a lein on the house, but as long as you don’t sell it, you’re OK.

IIRC Canda exempts pensions and RRSP (Canadian IRA) from bankruptcy seizure. However, like the IRA (I suspect) there are limits to what you can put into an RRSP - 18% of income to a max of $15,000 or something like that. You aren’t going to hide $20M in an RRSP. What’s the point of taking away your retirement pay to give to some creditors? It just means the government will support you more in your old age, so essentially it’s the government paying your creditors.

Of course, why would you be allowed to keep a house when bankrupt? The upkeep - heating, electricity, property taxes, etc - is usually enough to cause a problem anyway. Bankruptcy will allow you to keep what you reasonably need to live - your car if you need it to commute, clothes, eprsonal items not worth too much.

Often most provinces will make you file for orderly payment of debt instead if you have regular income. They figure out what you need to live on, and the rest goes to pay off your creditors. If the amount you can afford is below paydown level, they will make (?) creditors settle for a lesser amount so you can pay it off in a reasonable few years. IIRC the judge has a decent amount of latitude in what he decides.

If you have no income - well, you’re screwed anyway, and so are your creditors.

I remember reading about someone in Canada a while ago who went bankrupt, but the housing market was not good where he was; the house would sell for less than what the market would pay. So he was left with the house and mortgage payments, but each of the creditors received a lien on any future sale of the hosue for whatever they lost in the bankruptcy. Many years later, the guy was fully recovered and the house was worth substantially more so he went to sell it. He then discovered that one vindictive(?) creditor had gone around and bought up the rights of most of the others for pennies on the dollar. He sold the house and received almost nothing, and the creditor walked away with a huge profit.

The guy complained to the local newspaper but (not) surprisingly, the reaction was more sarcastic than sympathetic.

5

Thanks guys! So I went to the Ontario Execution Act, and it looks like OJ would be significantly more exposed in Ontario than in California or Florida. He’d get 5,000 worth of clothes, 10,000 worth of household furniture, and a car worth up to 5,000. (The quaint clauses pertaining to those “engaged solely in the tillage of the soil or farming” presumably would not apply.)

Interesting.

So, if anyone else is following, are other jurisdictions more or less favourable to protecting the OJs of the world?

ETA - Thanks as well MD2000 - I wrote this while you were posting

6

It’s not possible to say that this is the case throughout Canada, without knowing the law in each province, since exemptions are a matter of provincial law. The last time I checked, not all provinces protected RRSPs from seizure, so they could be seized in a bankruptcy. However, several provinces have enacted legislation in the past few years to protect RRSPs.