Bankruptcies in Alberta

A Comprehensive Guide to Understanding Bankruptcies in Alberta

Bankruptcy is a legal process that offers individuals and businesses debt relief when they are unable to repay their overwhelming debt 1. In Alberta, bankruptcy is governed by the Bankruptcy and Insolvency Act, which is administered and regulated through the Office of the Superintendent of Bankruptcy 2. This legal process, known as bankruptcy in Alberta, is regulated by the Bankruptcy and Insolvency Act and governed by the Superintendent of Bankruptcy 3.

This comprehensive guide aims to provide a thorough understanding of bankruptcies in Alberta, including the rising trend, common causes, and the legal process involved in declaring bankruptcy. It will also explore life after bankruptcyalternative debt relief optionsbankruptcy exemptions in Alberta, and the impact on credit scores and future financial opportunities.

Understanding Bankruptcy in Alberta

Bankruptcy in Alberta is a legal process regulated by the Bankruptcy and Insolvency Act and governed by the Superintendent of Bankruptcy 1 3 8. It offers debt relief to individuals and businesses unable to repay their overwhelming debt by surrendering certain assets to pay off debts and sharing a portion of their income with creditors, depending on their income level 1 8.

To qualify for personal bankruptcy in Alberta, an individual must:

  • Owe no less than $1,000 in unsecured debt 2
  • Owe more in debts than the value of their assets 2
  • Reside in, do business in, or own property in Canada 2
  • Be unable to repay their debts as and when they are due 2 8

During bankruptcy in Alberta, certain assets are protected and can be kept, known as “exempt property” 1 7. These include:

  1. Clothing and personal effects up to a set amount 1 7
  2. Household furnishings and appliances 1 7
  3. Tools or trade property used in your workplace, up to $10,000 1 7
  4. One family vehicle, up to $5,000 1 7
  5. Up to $40,000 of equity in your principal residence 1 7
  6. RRSPs, RESPs, pensions, and life insurance policies 1 7

The Rising Trend of Bankruptcies

Recent data reveals a concerning trend of rising bankruptcies across Canada, with the country reaching its highest level of insolvencies in 13 years 10. In March 2023, the total number of insolvencies, including both bankruptcies and proposals, increased by 28.1% compared to the previous month 11. This surge in insolvencies was particularly evident in specific sectors, such as:

  1. Accommodation and Food Services 11
  2. Construction 11
  3. Retail Trade 11

Bankruptcies alone saw a significant year-over-year increase of 75.6%, with the majority occurring in the accommodation and food services, retail, and construction sectors 10. Quebec, in particular, recorded the highest number of bankruptcies among all provinces, with 341 cases in January 2024 3.

The sharp rise in bankruptcies and proposals highlights the financial challenges faced by individuals and businesses across various industries in Canada. As the country navigates through economic uncertainties, it is crucial for those struggling with overwhelming debt to understand the options available to them, such as bankruptcy and alternative debt relief solutions, to make informed decisions and work towards a more stable financial future.

Common Causes of Bankruptcy

Several factors can contribute to individuals and businesses filing for bankruptcy in Alberta. Some of the most common causes include:

  1. Job Loss: Losing a job can lead to significant financial strain due to the loss of a regular income source 12. According to a 2023 CNBC survey, 58% of Americans live paycheck to paycheck 12. Losing a job may also mean losing health insurance, making individuals more vulnerable to large medical bills 12.
  2. Medical Expenses: Medical problems can lead to job loss, further exacerbating financial strain 12. Even those with insurance can face bankruptcy due to high costs 14. Most families do not have enough savings to cover unexpected medical costs 14, and the research indicates that inadequate health-care insurance is a significant issue 14.
  3. Housing-Related Debt: Housing-related debt, including mortgages and home-equity lines of credit, accounted for approximately 71% of household debt in the U.S. at the end of Q1’23 12. Adjustable-rate mortgages can lead to higher monthly payments if interest rates rise, potentially leading to bankruptcy 12.
  4. Overspending and Easy Credit: Overspending or living beyond one’s means can result in unmanageable debt 12. Easy availability of credit cards and installment loans can lead to overspending, resulting in bankruptcy if minimum payments cannot be met 13. Short-term solutions like home equity loans or debt-consolidation plans may also end in bankruptcy 13.
  5. Divorce: Divorce can be expensive, with legal fees, alimony, child support, and maintaining two separate households contributing to potential bankruptcy 13. Wage garnishment for unpaid alimony or child support can further strain finances 13.
  6. Unforeseen Events: A decrease in income or losing a job can make it difficult to pay off debts 15. Unforeseen events such as car breakdowns or property damage can also lead to bankruptcy 15.
  7. Student Loan Debt: Four in 10 people who attended college took out student loans, with a median student loan balance between $20,000 and $24,999 16. Given resumed payments and uncertainty about additional forgiveness, some people carrying student loan debt may have difficulty meeting other debt obligations 16.

For businesses, the rise in bankruptcies is primarily due to debt costswage costs, and higher interest rates 10. The weakening economy has led to reduced consumer spending, adding pressure to businesses’ bottom lines 10. Businesses are facing additional costs to service their debts due to higher interest rates, leaving less room to cover increasing costs of business 10. The strain combined with any additional financial challenges or setbacks this year could force businesses to shutter 10.

The Legal Process of Declaring Bankruptcy

The process of declaring bankruptcy in Alberta involves three segments and five stages, starting with a free consultation with a Licensed Insolvency Trustee (LIT) and gathering the necessary bankruptcy documents 9 15. The bankruptcy process involves a court-supervised liquidation of assets to pay off creditors, and any remaining debts are typically written off 2 3.

During the bankruptcy process, the debtor must:

  1. Surrender non-exempt assets to pay off debts 1 5 9
  2. Share a portion of their income with creditors, depending on the income level 1 5 8
  3. Attend two sessions of credit counselling 9
  4. Complete a monthly statement of income and expenses for the LIT 9
  5. Surrender credit cards and other credit facilities 2

The cost of a first-time bankruptcy in Alberta is approximately $1,800, but the value may increase if the debtor has assets that must be surrendered or if their income is higher than average 1 9. The trustee will use the proceeds from the sale of any assets to repay the creditors 1 12. In some cases, the debtor may be required to make payments to their trustee to repay a portion of the debt owed 1 13.

Upon signing the bankruptcy documents, a “Stay of Proceedings” is put in place, protecting the filer from collection calls, interest charges, wage garnishment, or legal action 9 16. The automatic discharge from bankruptcy occurs at nine months for first-time filers with no surplus income and at 24 months for second bankruptcies 9 20. If not approved for automatic discharge, an application can be made to the courts for release 9 21. Upon completion of duties and the bankruptcy period, one becomes eligible for release from debts 9 19.

Life After Bankruptcy

After declaring bankruptcy, individuals can take several steps to rebuild their credit and financial stability:

  1. Monitor [credit reports]( regularly to ensure discharged debts are accurately reported and dispute any errors 18 19 22 25 26.
  2. Save bankruptcy paperwork for future reference when applying for credit or dealing with collection agencies 19.
  3. Maintain stable employment and residence to demonstrate reliability to lenders 19 20.
  4. Rebuild credit by:
    • Paying bills on time 19 23 25 26
    • Keeping credit utilization low 19
    • Applying for a secured credit card 19 23 24 25 26
    • Gradually increasing credit mix 19
    • Using credit builder loans 19 25 26
  5. Start saving and follow a budget, such as the 50/30/20 rule (50% needs, 30% wants, 20% savings), to control spending and allocate funds for unexpected financial emergencies 19.
  6. Be prepared for challenges and exercise willpower, hard work, and patience to avoid repeating past financial mistakes 18.

Although a bankruptcy remains on a credit report for six to seven years 1 2, individuals can obtain credit shortly after receiving a discharge by establishing good credit habits and building relationships with lenders 23 24. Reaffirmation agreements with creditors can also help rebuild credit scores if preexisting debts are repaid during and after bankruptcy 24.

To further improve finances, individuals should:

  • Create an emergency fund 19 22
  • Set financial goals for future planning 19
  • Make wise choices when using credit cards, avoiding excessive debt and paying off balances in full each month 21
  • Seek guidance from a nonprofit credit counselor to create a strategy for rebuilding credit 23

By monitoring credit reports, disputing inaccuracies, making on-time payments, and controlling spending, individuals can gradually rebuild their creditworthiness after bankruptcy 25 26.

Alternative Debt Relief Options

For individuals struggling with overwhelming debt, there are several alternative debt relief options available in addition to bankruptcy:

  1. Credit Counseling: A certified nonprofit credit counseling agency can review your financial situation and help you devise a budget and plan for getting back on solid footing 27. They may also negotiate a program with your creditors that lowers your payments and resolves your debt problems within a few years 27.
  2. Debt Management Plans (DMP): A DMP is a repayment program a certified credit counselor can organize for you. After reviewing your finances and working with you to determine a realistic amount you can afford to put toward debt repayment each month, the counselor negotiates with your creditors with the goal of resolving your debts within three to five years 27. These plans involve making regular payments to a credit counseling company, which then makes payments on your behalf to your creditors. This option typically lowers credit card interest rates, waives late and over limit fees, and stops collection activity 28.
  3. Debt Consolidation: By moving the balances of high-interest credit cards to a loan with a fixed monthly payment, you can lower your interest costs and provide a single, predictable monthly payment in place of multiple payments 27. This involves getting a loan that covers all of your debts, simplifying the payment process. However, if you don’t pay your home equity loan, you could find yourself evicted since a home equity loan is secured by your house 28.

Other options include:

  • Debt Settlement: Debt settlement companies negotiate with creditors on your behalf to lower your debt burden dramatically. However, they charge high fees and there’s no guarantee your creditors will agree to negotiate 27. This involves creditors forgiving a portion of your debt. However, your credit report will show that the debt was paid for less than the agreed amount, which would likely lower your credit score. You may also have to pay taxes on the forgiven amount as revenue 28.
  • Selling Assets: This involves selling or liquidating an asset to pay off your debts quickly and easily. This can include selling a car, stocks, or bonds 28.
  • Increasing Income: Finding ways to increase income, such as taking on a part-time job, freelancing, or pursuing additional educational opportunities for career advancement, can contribute to improved financial health 28.
  • Consumer Proposal: A consumer proposal is an alternative to bankruptcy, allowing you to repay a portion of your debt over a set amount of time 1.

Regardless of the option chosen, lifestyle changes are necessary. This may include tracking expenses and creating a budget, as well as making small sacrifices now to avoid big problems later 28. Each person’s financial situation is unique, and there is no one-size-fits-all solution. Seeking professional advice from financial experts, credit counselors, or legal professionals can provide valuable insights and guidance 29.

Bankruptcy Exemptions in Alberta

In Alberta, bankruptcy exemptions allow individuals to keep certain assets despite declaring bankruptcy 1. These exemptions include:

  1. Home: Up to $40,000 equity in the debtor’s principal residence, including a mobile home 31 32.
  2. Necessities: Food required by the debtor and their dependents for the next 12 months, necessary clothing up to a value of $4,000, and household furniture and appliances up to a value of $4,000 31.
  3. Transportation: One motor vehicle not exceeding a value of $5,000 1 31.
  4. Health Supplies: Medical and dental aids required by the debtor and their dependents 31.
  5. Farming Equipment: Where the debtor’s principal source of livelihood is farming, specific farming equipment and resources are exempt 31. Up to 160 acres of land is exempt if the debtor’s principal residence is located on that land and is part of the debtor’s farm 32.
  6. Tools for Work: Personal property (i.e., tools, equipment, books) required by the debtor to earn income from their occupation up to a value of $10,000 1 31.
  7. Retirement Savings: Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Registered Disability Savings Plans (RDSP), and Deferred Profit Sharing Plans (DPSPs) 31.

The equity exemption in the debtor’s principal residence is proportionate to the debtor’s ownership interest if the debtor is a co-owner 32. For farming operations, personal property required by the debtor for the proper and efficient conduct of their farming operations for the next 12 months is also exempt 32.

The cost of a first-time bankruptcy in Alberta is typically around $1,800 1. However, these exemptions allow individuals to retain essential assets and maintain a basic standard of living while going through the bankruptcy process, providing a foundation for rebuilding their financial future.

Impact on Credit Score and Future Financial Opportunities

Filing for bankruptcy in Alberta has a significant impact on an individual’s credit score and credit report 1. A bankruptcy remains on the credit report for approximately six years from the discharge date 1, serving as a warning sign to potential lenders about a troubled payment history 24. The exact decrease in credit score points depends on the individual’s initial credit score, with someone starting at 680 potentially losing between 130 and 150 points, while an individual with a 780 score could lose between 200 and 240 points 23 25 26.

Lenders might be hesitant to extend credit to individuals with bankruptcies on their credit reports 25, as the number and amount of discharged debts also affect credit scores, although the bankruptcy itself has the most significant impact 26.

The cost of filing for bankruptcy in Canada varies depending on the individual’s financial situation and the complexity of the case 2. The minimum cost for a first-time bankruptcy is $2,250, which includes the Licensed Insolvency Trustee’s fees, court fees, and the cost of credit counselling sessions 2. It is important to note that the volume of spending in Canada is below pre-pandemic levels and nearing levels seen only in recessions 10, which may impact future financial opportunities for those considering or having filed for bankruptcy.


Bankruptcy in Alberta offers individuals and businesses a legal process to find relief from overwhelming debt, but it is not without its consequences. Filing for bankruptcy can have a significant impact on credit scores and future financial opportunities, with the negative mark remaining on credit reports for several years. However, by understanding the common causes of bankruptcy, the legal process involved, and the available exemptions, individuals can make informed decisions about their financial future.

While bankruptcy may provide a fresh start, it is essential to consider alternative debt relief options and seek professional advice to determine the best course of action. By implementing lifestyle changes, rebuilding credit through responsible financial habits, and setting clear goals, individuals can work towards a more stable and secure financial future after bankruptcy. With patience, perseverance, and a commitment to making wise financial choices, it is possible to overcome the challenges posed by bankruptcy and regain financial stability.


Q: What is the process of filing for bankruptcy in Alberta? A: When you file for personal bankruptcy in Alberta, you are required to give up certain assets to settle your debts. Additionally, if your income is above a certain threshold, you may have to contribute a portion of it to your creditors. The specific assets you must surrender and the amount of income you share can vary depending on the province where you file for bankruptcy.

Q: Which type of bankruptcy is generally considered more advantageous to file? A: Many individuals opt for Chapter 7 bankruptcy because it is relatively quick and efficient. Most filers receive a discharge of their qualifying debts within approximately four months. Furthermore, it is common for filers to retain the majority, if not all, of their property. Unlike Chapter 13, there is no requirement to adhere to a repayment plan that spans three to five years.


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