Filing for Bankruptcy in Alberta: What You Need to Know
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By Bromwich+Smith Staff |1673 words | Reading Time:8 minutes and 17 seconds | Date: 2023/04/04
If you are overwhelmed by debt in Alberta, you might consider filing for bankruptcy. If you are considering filing for bankruptcy in Alberta, it is important to understand the process and what it entails. With the help of a Licensed Insolvency Trustee, you can navigate the bankruptcy process with confidence and achieve a fresh financial start. At Bromwich+Smith we want to help you understand that bankruptcy is a strong resource but not always the right debt relief options depending on your personal situation.
What is bankruptcy?
Bankruptcy is a legal process which involves working with a Licensed Insolvency Trustee. Bankruptcy allows individuals or businesses debt relief when they are unable to pay off their overwhelming debt. In Alberta a bankruptcy is governed by the Bankruptcy and Insolvency Act which is administered and regulated through the office of these Superintendent of bankruptcy. This means bankruptcy is a federally regulated debt relief options with guidelines and regulations that must be adhered to.
What is involved in a personal bankruptcy?
In a personal bankruptcy in Alberta, you must surrender some assets to pay off debts, and depending on your income, share a portion of your income with creditors.
Know that you know that you will be required to surrender some of your assets to pay off your debt, you may not know that depending on your income you may need to share a portion of your income to your creditors as well. While it will vary between provinces in Alberta during a bankruptcy, Alberta law allows you to keep:
- Clothing and personal effects up to a set amount
- Household furnishes and appliances
- Tools or trade property that you use in your workplace to secure your income to a Max value of $10,000
- 1 family vehicle to a maximum value of $5000
- Your portion as up to $40,000 of equity in your principle residence
- You may also qualify to retain your RRSP's, are ESPS, pensions, in life insurance policies
It is important to note that these amounts will change based on which province you reside and file bankruptcy in. A Licensed Insolvency Trustee will be able to help walk you through and answer any questions you have in regards to what you are able to keep and what must be sold and given to your creditors during a bankruptcy.
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Can I afford a bankruptcy?
If you do not have any assets the cost of a first time bankruptcy in Alberta, will cost approximately $1800. That said it is important to consider the value of assets you must forfeit during a bankruptcy for example if you have purchased a recreational vehicle or a boat, camper, luxury vehicle etc you must surrender the asset which will then be sold with the proceeds going to your creditors. the value of that plus your $1800 basic fee will increase the value of your bankruptcy. Your income will also be considered during your bankruptcy if you earn a higher income you may be required to pay more into the bankruptcy then someone who has a lower income. If your income changes throughout your bankruptcy your changing income must be reported to your license insolvency trustee and the terms of your bankruptcy maybe haltered.
What debt is included in a bankruptcy?
Typically a bankruptcy will not include your secured debt including housing or vehicles. This means your bank or vehicle lender will be able to seize the assets if payments on the loans are not being made. If you would like to keep that asset during your bankruptcy you must ensure the payments continue to be made. If you do not plan on keeping the asset he may choose to surrender it and any amounts owed towards that asset can be written into your bankruptcy. There are some forms of debt which will not be included in your bankruptcy and can include debt from fraud or theft, court imposed fines, restitution orders, alimony or child support obligations, or student debt under seven years old.
How long will a bankruptcy show on my credit score?
There are several factors that will determine the length of your bankruptcy including your income and if you have filed for bankruptcy previously. If this is your first bankruptcy the length of time from your bankruptcy to discharge is a minimum of nine months during a second filing of bankruptcy the time from filing to discharge is a minimum of 24 months. Typically your bankruptcy will show on your credit report for six years from discharge date.
What is the process of filing a bankruptcy?
The first step is to understand what debt you have and who you owed the debts to. In Canada only a licensed insolvency trustee can help you handle your bankruptcy, well many organisations offer debt relief support only a licensed insolvency trustee can file a bankruptcy to the office of these 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 goal of these sessions will be to build essential skills like budgeting and debt management to ensure that you will not find yourself in the same situation again. Once you have completed the required counseling your license insolvency trustee will be able to help you file for bankruptcy. They will be able to help you understand the full details of your bankruptcy including which assets need to be surrendered and how to do so.
Your trustee will use the proceeds from the sale of any assets and repay your creditors. In some cases you may be required to make payments to your trustee to repay a portion of the debt owed. The amount will vary depending on your circumstance including your income, the value of your assets and the total debt owed. After you have completed the required payments Anne fulfilled all obligations you will be discharged from bankruptcy your trustee will provide you with a certificate of discharge that releases you from the obligation of repaying the debt and allows you to start regaining your credit.
What if I don't want to file bankruptcy?
bankruptcy is most often looked at as the last resort in debt relief options. In many cases bankruptcy is not the ideal option and your license insolvency trustee will help you explore other options including debt consolidation loans, Credit counseling, debt management plans and consumer proposals.
A consumer proposal much like bankruptcy is offered through a Licensed Insolvency Trustee but unlike a bankruptcy it allows you to repay a portion of your debt over a set amount of time. Your trustee will negotiate with your creditors on your behalf based on your financial situation and what you can afford to pay back. Once agreed upon between your creditors and yourself a financial plan will be set with you making a monthly payment for up to five years. At this point you're debt has been paid off and you are able to start rebuilding your credit this can be a good option for those who have a stable income and do not want to file for bankruptcy.
Your license insolvency trustee will be able to give you the benefits and the downsides to all debt relief options
Part of their job is to ensure that you understand the options available to you and are comfortable with the debt relief program chosen.
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Filing for bankruptcy in Alberta can be a complex and overwhelming process, but it doesn't have to be. With the help of a Licensed Insolvency Trustee, you can navigate the bankruptcy process with confidence and achieve a fresh financial start. At Bromwich and Smith, we are committed to helping our clients achieve financial freedom and regain control of their lives. If you are living in Alberta and plan to file for bankruptcy, we have offices in Calgary, Edmonton, Fort McMurray, Grande Prairie, Lethbridge, Medicine Hat, and Red Deer that can help you through the bankruptcy process. Contact us today to schedule a free consultation and learn more about your debt relief options. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1-855-884-9243, or request a call back at contact us page. We want to see you flourish!
Related FAQ:
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 $1000 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 to filing bankruptcy in Alberta?
In Alberta when you file for bankruptcy you may be required to surrender some of your assets including home or vehicle, recreational vehicles, campers etc there will be a negative impact on your credit score drain 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. You may experience difficulty obtaining credit during or following your bankruptcy and may impact your ability to obtain specific employment, insurance policies or loans. There are many organisations that will work with you to obtain credit during your bankruptcy but you may be required to pay higher interest rates. Bromwich plus Smith has a list of preferred partners and are able to refer you to ensure you are able to obtain the credit you require.
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. Your license insolvency trustee will be able to help you with your CRA debt.
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 license 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.