Alberta Bankruptcy Exemptions

Will I lose my house? Will I lose my car?

If you are thinking of filing for bankruptcy, you likely have some big questions about how it will affect you. For instance, “Will I lose my house and car” or “are any of my assets exempt from bankruptcy in Alberta?”. In this article, we look at the Alberta bankruptcy exemptions (from the Civil Enforcement Act) and put our heads together in the hope of answering your most pressing questions when it comes to bankruptcy and clarifying misconceptions about ‘losing everything.’ If you want more information at the end, feel free to reach out to us at Goth & Company for further advisement.

What Assets Will I Lose?

This is the common question on most people’s minds, and it’s a fair one when evaluating your options for insolvency. When you apply for bankruptcy, you consign your assets to a Trustee as currency to repay your debts. Your Licensed Insolvency Trustee (LIT) will convert your assets into cash. The Bankruptcy & Insolvency Act (BIA) is an essential piece of federal legislation that dictates how that cash is distributed amongst your creditors.

Bankruptcy will require the surrender of SOME assets, but NOT everything you own!

The BIA is also a safeguard against you losing everything. It makes sure that you are able to maintain an adequate standard of living while bankruptcy procedures are in effect. In particular, specific exemptions are in place in Canada that protect you from losing everything. Only “non-exempt” assets are required by your Trustee in a bankruptcy scenario. Are you wondering what assets you CAN keep? That’s a great question.

What Assets Are Exempt?

This depends on where you live in Canada. Exemptions vary province to province. We will talk about Alberta’s exceptions shortly, but first, we should speak of Canada’s universal exemptions. The following exemptions are laid out in the Bankruptcy & Insolvency Act and apply across all provinces:

• All registered RRSPs, RRIFs, and DPSPs are exempt from the collection during bankruptcy (with the exception of regular payments from the plan)
• All registered disability plans and out-of-plan payments are exempt
• All registered savings plans for post-secondary education AND any payments are exempt. This includes any refunds to assist your furthered education. Out-of-plan payments or refunds are not exempt.

For all other exemptions, every province is different. Knowing your province’s bankruptcy exemptions is helpful when deciding if bankruptcy is right for you.

Alberta Bankruptcy Exemptions:

In our province, the Civil Enforcement Act dictates which assets are exempt from seizure during bankruptcy proceedings. The act mandates how and when property can be collected for the settlement of your debts. Exemptions, in some cases, take into account the total value of your equity in a particular asset. Here is a list of Alberta’s bankruptcy exemptions:

• You are entitled to keep the necessary clothing for you and your dependents.
• You can keep enough food to support you and your dependents for up to 12 months.
• You can retain up to $4,000 in home furnishings and appliances
• All medical and dental aids are exempt
• A motor vehicle valued at $5,000 or less is exempt
• Any tools required to earn income from your occupation are exempt up to a maximum of $10,000
• Equity in your home is exempt for $40,000 (if you co-own a home this amount will differ and is based on what percent of the property you personally own)
• If you are the recipient of a social allowance, handicap benefit, or widower’s pension, these should be exempt as long as they are separate from your other funds
• All property in an RRSP or RESP is exempt
• A number of life insurance policies are exempt – talk to your Licensed Insolvency Trustee to learn more

Exemptions for Farmers:

In Alberta, a farmer is allowed to keep any property that is required in order to sustain up to 12 months of farming operations. They are also entitled to retain up to 160 acres of land and their primary residence if it is on that land.

Have more questions about bankruptcy exemptions in Alberta? A Licensed Insolvency Trustee will be able to help. At Goth & Company, your first appointment is FREE. You are under no obligation. As licensed trustees, we have a legal obligation to ensure you have all the facts. You decide on your next steps. We can help you make sense of complex insolvency laws and find a resolution to get you back on track. It can make all the difference to know what options are available to you and how they will impact your financial future. A Licensed Insolvency Trustee will begin with a thorough review of your finances, based on those numbers and your personal circumstances, find the best solution for you and your family.

Alberta Bankruptcy Exemptions for a Primary Residence

Is It Possible To Keep My House?

This is often a top concern for most Canadians facing the possibility of bankruptcy. The good news is, just because you declare bankruptcy does not necessarily mean you have to lose your home. Alberta’s Civil Enforcement Act, in addition to the equity in your home, is the primary deciding factor in determining if you can keep your home. If the equity in your home is $40,000 or less, it is entirely exempt from collection during bankruptcy. You also cannot increase the amount of your equity in your home to be higher than $40,000 during bankruptcy. What if your home equity is greater than $40,000? In this case, you have two options:

Option A:

You can surrender your home to your Trustee, who will utilize those funds to pay your debts.  This option can make the most sense if you are someone who does not have a strong desire to keep their home or does not have the money to pay the equitable difference.

Option B:

Very often, people will simply pay the difference and keep their house. This means if your home equity is worth $50,000 and the exemption policy is $40,000, you would need to pay $10,000 to keep the property.

Are you looking to settle your debts AND keep your home? Talk to a Licensed Insolvency Trustee; they are your best resource for helping you keep your property. Every day Canadians are able to keep the home they love while settling their debts through bankruptcy – you can too!

Alberta Bankruptcy Exemptions for a Vehicle

Is It Possible To Keep My Car?

This is usually the next question on everyone’s minds. We’re happy to report that you do not necessarily have to lose your car as a result of bankruptcy. Alberta’s Civil Enforcement Act, in addition to your car’s equity, is the foremost deciding factor when it comes to keeping your car. If the equity of your car is $5,000 or less, you keep your car! Keep in mind that you want to hold off on making any significant modifications to your car during the bankruptcy period that could increase its value beyond $5,000. What if your car’s equity is greater than $5,000? In this case you have two options:

Option A:

You may surrender your car to your Trustee, who will utilize those funds to pay your debts.  This option can make the most sense if you are someone who does not rely on their vehicle or does not have the money to pay out the difference in equity.

Option B:

As you may have guessed, oftentimes, people will choose to pay the difference and keep their car. This means if your car’s equity is worth $6,000 and the exemption policy is $5,000, you would need to pay $1,000 to keep the vehicle.

Are you hoping to settle your debts AND keep your car? Talk to a Licensed Insolvency Trustee – they are your best resource for helping you maintain your vehicle. Thousands of Canadians have been able to keep their personal cars while settling their debts through bankruptcy!

Is It Possible To Keep All My Assets AND Settle My Debts?

Absolutely! When it comes to settling your debt in Canada, bankruptcy is typically a last resort. Your Trustee will do everything they can to find a better alternative for you. The good news is, you can settle your debts and keep your assets. In particular, consumer proposals allow you to repay your debts for significantly less than you owe while maintaining control of your assets.

In Canada, a consumer proposal is the only legally binding way to settle your debts for less you owe. Proposals must be administered by a Licensed Insolvency Trustee. Your LIT will create a proposal for repayment of up to 70% less than you currently owe, free of interest. Your personal circumstances, family size, and financial history will all be factors in the offer. All your debts will be consolidated into monthly installments, which can be arranged for anywhere from 5 months to 5 years – you decide. You get to keep all your assets, and you receive immediate creditor protection. Say goodbye to the stress and worry of collection calls and having your paycheck garnished. Want to know more? Contact a Licensed Insolvency Trustee today!

With a Consumer Proposal:

• Debt forgiveness – typically, you repay 30-40% of what you owe.
• You get to keep all your assets, no questions asked!
• Consolidation of your debts into a single monthly installment for the length of your term.
• You will never pay more than you can afford.
• Legal protection from creditors – the moment you file creditors can no longer take legal action against you or hound you with collection calls.
• You choose the length of your term up to 5 years, interest-free!
• A debt settlement alternative to bankruptcy.

If you have the ability to repay SOME of what you owe, a consumer proposal might just be for you. The best thing to do is talk to a Licensed Insolvency Trustee and find out exactly what your options are.

Next Steps?

There are a lot of twists and turns along the journey toward regaining your financial security. We can help you navigate insolvency, saving you time and money. We touched on a few critical points about exemptions and bankruptcy but, to have all your questions answered, it’s best to schedule an appointment with a Licensed Insolvency Trustee – it’s completely FREE and confidential. Call us today 1.780.435.5110 Get out of debt and back on track!