Declaring Bankruptcy After Getting Laid Off in Alberta

The economic fallout of the Covid-19 pandemic has left many Albertans grappling with job loss and financial instability. If you’re one of the 15.3% of people in Alberta who were let go due to the pandemic, you’ve likely felt the weight of escalating debts. However, you’re not alone, and there are resources available to help you regain financial control. One such option is declaring bankruptcy. This article delves into the intricacies of declaring bankruptcy after getting laid off in Alberta.

Understanding Bankruptcy

Bankruptcy is a legal process that provides a fresh start to individuals overwhelmed by debts. It’s crucial to understand that declaring bankruptcy is not the only way out of a financial rut. It’s one option among many, and it’s important to weigh the pros and cons before making a decision.

Seeking Professional Guidance

When debts become unmanageable, seeking professional advice from a Licensed Insolvency Trustee (LIT) can be a lifeline. LITs can provide an objective analysis of your financial situation and guide you through the available options. They can help you create a roadmap towards financial stability.

Declaring Bankruptcy While Unemployed

While bankruptcy can alleviate the pressure of debt, it’s important to consider your employment status. If you’re unemployed, your income will still factor into the bankruptcy process. This includes determining the amount you’ll pay during bankruptcy and how long you’ll be declared bankrupt. The Bankruptcy and Insolvency Act outlines these specifics. Note that while you’re unemployed, it’s more difficult for creditors to take action against you. They can’t garnish your pension income or unemployment benefits.

However, unemployment doesn’t make you ‘judgement proof’—a term referring to individuals who lack sufficient assets for creditors to seize for debt repayment. Declaring bankruptcy can instantly prevent creditors from taking action against you. It can also reduce the stress of dealing with persistent creditors.

Remember, bankruptcy comes with consequences. You may lose some of your assets, and your credit score will take a hit. Therefore, discussing your situation with an LIT before making a decision is crucial.

Eligibility for Bankruptcy

If you’re contemplating bankruptcy, you must meet certain eligibility criteria:

  • You must be at least 18 years old.
  • You must be a permanent resident in Canada.
  • You must have more than $1,000 of unsecured debt.
  • You must be unable to repay your debt.

Remember, just because you’re eligible doesn’t mean bankruptcy is your best option. An LIT can help you evaluate your choices and find the best debt management solution for you.

Duration of Bankruptcy

The duration of bankruptcy varies based on individual circumstances and whether you’ve declared bankruptcy previously. As a first-time declarer, bankruptcy typically lasts nine months, provided you fulfill all duties assigned by your LIT.

The following tables provide a comparison of how long bankruptcy lasts based on specific circumstances:

First Bankruptcy

Surplus income Discharge Time
Less than $200 per month Nine months after filing
More than $200 per month 21 months after filing

Second Bankruptcy

Surplus income Discharge Time
Less than $200 per month 24 months after filing
More than $200 per month 36 months after filing

Alternatives to Bankruptcy

Bankruptcy may not be the best option for everyone. Here are some alternatives to consider:

Asset Liquidation

One way to manage your debts without declaring bankruptcy is asset liquidation. Selling valuable items can help you repay your debts.

Credit Counselling

LITs also offer credit counselling services. They can help you devise a budget, evaluate your spending habits, and advise you on managing your debts responsibly.

Consumer Proposal

A Consumer Proposal is a legal agreement between you and your creditors. Approved by a trustee, a consumer proposal can lead to partial debt forgiveness, and you repay the remaining balance at a lower interest rate.

Final Thoughts

With the right guidance and financial plan, you can regain control of your financial health. Bankruptcy Canada offers professional and compassionate support through their Licensed Insolvency Trustees. Contact us today to take a step towards a brighter financial future.

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