Filing for Bankruptcy in Alberta: What You Need to Know

Understanding Bankruptcy in Alberta: A Comprehensive Guide

If you’re grappling with debt in Alberta, filing for bankruptcy may cross your mind. This guide aims to demystify the process, and equip you with the knowledge you need to make an informed decision. Remember, bankruptcy can be a powerful tool for debt relief, but it’s not always the best solution for everyone.

What Exactly is Bankruptcy?

The term ‘Bankruptcy’ refers to a lawful procedure that involves co-operation with an authorized insolvency trustee. It offers a reprieve for individuals or businesses unable to offset their towering debts. Bankruptcy in Alberta is subject to the Bankruptcy and Insolvency Act, which is controlled and regulated by the Superintendent of Bankruptcy’s office. Hence, bankruptcy is a federally regulated debt relief option with strict guidelines and regulations.

The Personal Bankruptcy Process in Alberta

Personal bankruptcy in Alberta necessitates the surrender of certain assets to offset debts. Also, depending on your income, you might be required to share a portion of your income with your creditors.

During a bankruptcy process in Alberta, the law permits you to retain:

  • Clothes and personal items up to a specified amount
  • Household furniture and appliances
  • Tools or trade assets used in your workplace to earn an income, up to a maximum value of $10,000
  • One family vehicle up to a maximum value of $5,000
  • Your share of up to $40,000 of equity in your primary residence
  • You may also qualify to keep your RRSPs, RESPs, pensions, and life insurance policies

It’s crucial to note that these amounts may vary based on the province in which you reside and file bankruptcy. A licensed insolvency trustee can provide guidance and answer any questions regarding what you can keep and what must be liquidated to repay your creditors during bankruptcy.

The Cost of Filing for Bankruptcy

If you possess no assets, the cost of a first-time bankruptcy in Alberta will be approximately $1,800. However, you must consider the value of assets you must forfeit during a bankruptcy. If you have acquired a recreational vehicle, boat, luxury car, etc., you must surrender these assets, which will then be sold, and the proceeds will go to your creditors.

Your income is also factored into your bankruptcy. If you earn a higher income, you may be required to pay more into the bankruptcy than someone with a lower income. If your income fluctuates during your bankruptcy, you must report the changes to your licensed insolvency trustee, and the terms of your bankruptcy may be altered.

The Types of Debt Included in a Bankruptcy

Typically, a bankruptcy does not include your secured debt, like housing or vehicles. This means your bank or vehicle lender can seize the assets if loan payments are not being made. If you wish to keep the asset during your bankruptcy, you must ensure payments continue.

Some forms of debt will not be included in your bankruptcy. These can include debt from fraud or theft, court-imposed fines, restitution orders, alimony or child support obligations, or student debt under seven years old.

The Duration of a Bankruptcy on Your Credit Score

The length of your bankruptcy depends on several factors, including your income and whether you have filed for bankruptcy before. If this is your first bankruptcy, the duration from your bankruptcy to discharge is a minimum of nine months. In the case of a second bankruptcy filing, the time from filing to discharge is a minimum of 24 months. Typically, your bankruptcy will appear on your credit report for six years from the discharge date.

The Procedure of Filing for Bankruptcy

The first step is to understand your debts and to whom you owe them. Only a licensed insolvency trustee can help you handle your bankruptcy in Canada. While many organizations offer debt relief support, only a licensed insolvency trustee can file a bankruptcy to the office of the Superintendent of Bankruptcy.

During your bankruptcy program, you must complete credit counseling. This involves meeting with a credit or financial counselor to understand your debts. The aim of these sessions is to build essential skills like budgeting and debt management to ensure that you do not find yourself in the same situation again.

Once you have completed the required counseling, your licensed insolvency trustee can help you file for bankruptcy. They will help you understand the full details of your bankruptcy, including which assets need to be surrendered and how to do so.

Bankruptcy Alternatives

Bankruptcy is often seen as the last resort in debt relief options. In many cases, bankruptcy is not the ideal solution, and your licensed insolvency trustee will help you explore other options, including debt consolidation loans, credit counseling, debt management plans, and consumer proposals.

Conclusion

Filing for bankruptcy in Alberta can be an intricate and overpowering process. However, with the assistance of a licensed insolvency trustee, you can confidently navigate the bankruptcy process and secure a fresh financial start. At Bromwich and Smith, we are committed to helping our clients regain their financial freedom and control of their lives.

If you reside in Alberta and plan to file for bankruptcy, we have offices across Alberta including Calgary, Edmonton, Fort McMurray, Grande Prairie, Lethbridge, Medicine Hat, and Red Deer to assist you through the bankruptcy process. Contact us today to schedule a free consultation and learn more about your debt relief options.

Our Debt Relief Specialists are available by phone or request a callback at our contact us page. We want to see you flourish!

Frequently Asked Questions

  1. What are the requirements to file bankruptcy in Alberta?

    To file for bankruptcy in Alberta, you must be insolvent, meaning that you owe at least $1,000 and are unable to pay your debts. You must be a resident of Alberta or conducted business in Alberta within the last 12 months.

  2. What are the consequences of filing bankruptcy in Alberta?

    When you file for bankruptcy in Alberta, you may be required to surrender some of your assets. There will be a negative impact on your credit score during your bankruptcy. This will not stay on your credit report forever, and you will have the ability to rebuild your credit during and after your bankruptcy.

  3. How will filing for bankruptcy in Alberta affect my taxes?

    When you file for bankruptcy in Alberta, you will be required to pay taxes on any forgiven debt, and your tax refunds may be seized by your trustee to pay off your creditors. If you owe taxes to the Canada Revenue Agency, they will be treated as an unsecured debt in your bankruptcy.

  4. Will I be able to operate a business if I file for personal bankruptcy in Alberta?

    It may be possible to continue operating your business after filing bankruptcy in Alberta. You will need to talk to your licensed insolvency trustee to obtain permission and comply with all outlined requirements. These may include maintaining accurate financial records and reporting your income to your licensed insolvency trustee.

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