Declaring bankruptcy is a significant decision that could have lasting impacts on your financial and personal life. In Alberta, understanding the bankruptcy basics is essential for individuals facing severe debt issues or considering bankruptcy as a last resort. This comprehensive guide will walk you through the process, consequences, and alternatives of bankruptcy in Alberta.
Bankruptcy: An Overview
Bankruptcy is a legal process regulated by the Bankruptcy and Insolvency Act (BIA) that allows debt-ridden individuals or businesses to eliminate most of their debts and start afresh. Although it provides immediate relief from debt collectors, it should be considered as a last resort due to its long-term implications.
Identifying the Need for Bankruptcy
The first step is determining if bankruptcy is indeed the right solution. You might consider bankruptcy if you:
- Can’t pay bills on time.
- Receive calls from collection agencies.
- Have wages garnished.
- Are unable to maintain basic living expenses.
The Bankruptcy Process in Alberta
Filing for bankruptcy in Alberta involves several steps:
- Consultation: You should consult with a Licensed Insolvency Trustee (LIT) who will assess your financial situation, explain all available options, and help you make an informed decision.
- Filing: If bankruptcy is the chosen route, your LIT will file necessary documents with the Office of the Superintendent of Bankruptcy (OSB).
- Administration: The LIT will sell your assets, excluding those exempted by Alberta’s laws, to repay your creditors.
- Discharge: After fulfilling all duties, you’re discharged from bankruptcy, releasing you from the obligation to pay back most of your debts.
Assets in Bankruptcy
In Alberta, specific assets are exempt from seizure in a bankruptcy, including some equity in a home, one motor vehicle, necessary clothing, household goods, among others.
Responsibilities and Duties
When declaring bankruptcy, you are required to:
- Disclose all assets and liabilities to your LIT.
- Attend two financial counselling sessions.
- Report your monthly income and expenses.
- Surrender all credit cards.
- Pay surplus income to the LIT.
Consequences of Bankruptcy For Albertans
Bankruptcy influences several aspects of your life:
- Credit Rating: It remains on your credit report for at least six years after discharge, affecting your ability to get credit.
- Assets: You may lose some assets, and any acquired during bankruptcy could be seized.
- Surplus Income Payments: If your income exceeds a certain limit, you’ll be required to make surplus income payments.
- Employment: Certain professions may have restrictions or disclosure requirements related to bankruptcy.
Bankruptcy Alternatives
Several alternatives to bankruptcy can help manage debt:
- Debt Consolidation: Combining all your debts into one loan to reduce interest rates and monthly payments.
- Debt Settlement: Negotiate with creditors to pay a reduced sum that’s considered as full payment.
- Consumer Proposal: A legally binding process administered by an LIT where you propose to pay creditors a percentage of what is owed or extend the time to pay off the debts.
Cost of Bankruptcy
As per the BIA, the costs include a base contribution covering administrative costs, and if your income exceeds government-set limits, you will need to make surplus income payments.
Life After Bankruptcy
Life after bankruptcy offers a fresh start to rebuild your financial life. You’ll need to re-establish your credit, create a budget, save and invest wisely, and learn from past mistakes.
Getting Help
If you’re contemplating bankruptcy, it’s essential to seek advice from professionals. Licensed Insolvency Trustees are the only professionals authorized to administer the bankruptcy process.
Declaring bankruptcy is not an easy decision, but understanding the ‘Bankruptcy Basics for Albertans’ can guide you through the process. It’s crucial to explore all your options and consult with a professional before making a decision.
