Filing for Bankruptcy in Alberta
How to Declare Bankruptcy in Alberta
Financial stress can be very overwhelming, especially if you have accumulated more debt than you can afford to repay. Don’t let the threat of legal action and collection calls keep you up at night. In Canada, you have options when it comes to debt resolution. Bankruptcy is often a last resort, but it also offers creditor protection and gives you the chance to start over. Knowing and understanding how the process works can help put your mind at ease. If you are considering bankruptcy, this article will be an excellent resource for you. We discuss each step of the process, from your first meeting with a Trustee to receiving your certificate of debt freedom. There are three segments and five stages to filing for bankruptcy in Alberta. Want to know what to expect before, during, and after filing for bankruptcy? Keep reading.
Are You Considering Filing for Bankruptcy?
If you have come to this article, you likely want to learn more about the bankruptcy process before taking that next step. The federal and provincial laws around debt resolution can be complicated. We will give you clear answers to the most important questions about filing for bankruptcy in Alberta. If you have specific questions about your debt situation, you can always talk to a Licensed Insolvency Trustee (LIT).
Step 1: Book A Free Consult with A Licensed Insolvency Trustee (LIT)
This is the first step if you are struggling with debt. The meeting is risk-free, and you are under no obligation. LITs are legally required to explain all your options to you and ensure you understand how each one would impact you, based on your financial situation. Trustees are the most highly trained debt consultants in Canada. They are bound by a code of ethics and are recognized as officers of the court. First, your LIT will want to hear your situation and with that information, they can explain your options.
Yes, you heard right – there are options! In Alberta, you do have alternatives to bankruptcy. Your Trustee will explain each option to you as well as how each one would apply to your situation. This is the perfect time to ask questions. We want you to feel confident about your next financial decision. If you decide that bankruptcy is the way to go, your Trustee will facilitate the following steps and ensure that you know what your bankruptcy exemptions are in Alberta.
Preparing for Your First Meeting:
- Prepare a written list of ALL your debts, including who you owe and how much is owed to each creditor.
- Be ready to talk with the Trustee about your financial circumstances, such as monthly income and expenses.
- We recommend bringing a list of questions you would like answered.
QUESTION: How does payment work for a Licensed Insolvency Trustee (LIT)?
- Your initial consultation with a LIT is always free. In the case of declaring bankruptcy, your Trustee is paid for their services from the funds of the bankruptcy estate. These funds are standard for all LITs and regulated by the Office of the Superintendent of Bankruptcy (OSB).
Step 2: Gathering Bankruptcy Documents
Bankruptcy is not something you can file on your own – it can only be administered by a Licensed Insolvency Trustee (aka Bankruptcy Trustee). Your Trustee is responsible for compiling all the necessary information in order to complete the documents required to file. Without this paperwork, it is not possible to file for bankruptcy. At this step, your LIT may ask for a deposit.
Your Trustee will be in contact with you for the standard questions such as your legal name, place of residence, and date of birth. You will also be asked to provide a list of ALL your assets, such as the value of your home, mortgage balance, vehicle(s), pensions, insurance plans, money in the bank, and any other property. You will need to offer complete disclosure during this process. Any discrepancies about your assets could prevent you from obtaining a discharge from your debts.
Key Bankruptcy Documents in Alberta:
- The Assessment Certificate – verifies that you met with a Licensed Insolvency Trustee and that all your options have been explained to you – it also confirms that you have filed for bankruptcy.
- The Monthly Income And Expense Statement (Form 65) – this is a monthly report of your monthly budget for you, your family, and dependents.
- The Statement of Affairs (Form 79) – this document is a summary of your assets and liabilities.
- The Assignment For The General Benefit Of Creditors – this document proves that you have filed for bankruptcy in Alberta and agree to transfer your non-exempt assets over the Trustee.
In addition to these essential documents, there will be some additional paperwork your LIT will complete and get you to sign. When the preparation of all bankruptcy documents is complete, you will meet with your Trustee to review and approve the forms. Prior to signing the documents, your Trustee will explain everything to you in detail and ensure all your questions are answered. When you are ready, the final step to filing is signing the bankruptcy documents.
QUESTION: Can I request to review the bankruptcy documents before meeting with the Trustee to sign them?
- Your LIT will go through the documents with you in detail at the meeting, but you may request the forms ahead of time for your own review.
Step 3: Filing Bankruptcy Documents
As soon as your documents are signed and witnessed, your Trustee can file to the government. This is done electronically by your LIT. The system for filing is set up to ensure that all cases are registered in the same manner. After your document has been uploaded, your LIT will obtain a Certificate of Appointment which confirms the beginning of your bankruptcy. Now your creditors can be advised that a “Stay of Proceedings” is in effect and that they must deal directly with your Licensed Insolvency Trustee going forward. The “Stay” safeguards you from collection calls, interest charges, wage garnishment, or legal action. You can breathe a sigh of relief knowing that your LIT will handle all negotiations with your creditors on your behalf.
A “Stay of Proceedings” safeguards you from:
- Receiving collection calls
- Being charged interest
- Having your wages garnished
- Any legal proceedings
What Happens After Declaring Bankruptcy in Alberta?
Before you can be released from bankruptcy, you must fulfill your legal duties as a bankrupt. These obligations will have already been explained to you in your first meeting with the LIT and at the signing of documents. But, if anything changes to your situation that affects your ability to fulfill your obligations, we advise you to contact your LIT right away. Depending on the circumstances, it may be possible for your Trustee to grant you an extension. Upon completion of your term and obligations, you become eligible for release from your debts.
Step 4: So, What Duties & Legal Obligations Can I Expect?
After filing for bankruptcy, your first duty is turning over your assets (non-exempt) to the Trustee. The Alberta bankruptcy exemptions will have already been explained to you by your LIT, so you are aware of what assets you can keep. Your LIT handles the sale of your assets and ensures the proceeds are placed into the bankruptcy estate. The bankruptcy estate holds the money that will be used to pay your creditors. The payment of creditors in Canada follows a stringent set of rules outlined in the Bankruptcy & Insolvency Act (BIA).
When you declare bankruptcy, you must turn your credit cards over to your LIT to be cancelled and closed. This applies to ALL your credit cards. A third-party credit card that you are authorized to use, such as a spouse, employer or friend, will not be affected by this rule.
The BIA requires that you attend two sessions of credit counselling with a licensed professional before you can be released from your debts. You have 60 days to attend the first session and 210 days to complete the second session. This is in the best interest of your financial future. These new strategies, habits, and skills will help to prepare you for a fresh start. Your LIT will coordinate these meetings with you.
You are legally required to produce a report of your income and expenses to your LIT every four weeks. Based on these numbers and factors such as family size and additional expenses, the Office of the Superintendent of Bankruptcy (OSB) can determine whether surplus income payments are required. This is a standard part of the bankruptcy process and will have already been discussed with you in your first meeting.
During bankruptcy, all tax returns are filed on your behalf by your Trustee. It is your legal duty to provide any information that your LIT may need in order to process the necessary paperwork. Returns work differently in a bankruptcy scenario, and your LIT will file twice on your behalf. The first filing is known as a ‘pre-bankruptcy’ return for the current year up until the date you filed for bankruptcy. The following return is referred to as ‘post-bankruptcy’ and simply covers the time from date of filing to present. All revenue from your tax returns will be placed into your bankruptcy estate towards repaying your debts.
Finally, you have a duty to pay a base payment every month towards the bankruptcy estate. This number is independent of any surplus payments you may have and is decided based upon your income and BIA guidelines. The LIT ensures that the funds are distributed in a fair manner between your creditors, following the BIA guidelines.
The obligations for a bankrupt in Alberta are as follows:
- Hand all non-exempt assets over to your LIT
- Hand your credit cards over to your LIT to be cancelled and closed
- Pay the base monthly payment towards your bankruptcy estate
- Complete two sessions of credit counselling prior to the deadline
- Pay the required surplus payments (if applicable)
- Prepare a monthly statement of your income and expenses for your LIT
- Hand over any information your LIT needs in order to file your tax returns
QUESTION: What if my income is low (or none), and I do not have any assets? How much will I have to pay?
- Provided this is your first-time declaring bankruptcy, you will pay $200 per month towards the bankruptcy estate for a total of nine months.
Step 5: Bankruptcy Discharge
It is the end of your bankruptcy period, and you have concluded your duties as bankrupt, what comes next? You should receive an automatic discharge from bankruptcy – in other words; your debts have been absolved. If this is your first bankruptcy and you have no surplus income, you are eligible for release at nine months. For second bankruptcies, you qualify for automatic discharge at 24 months. Your creditors and Trustee must mutually approve your release.
In the case that you are not approved for automatic discharge, your LIT is actually able to put forward an application to the courts requesting your discharge. A hearing will be held, and your Trustee will present your case for release – you must be present. Your creditors may be present at this hearing and, if they wish, they can state objections. The hearing will result in two possible outcomes: 1. You may be granted a discharge from bankruptcy, or 2. You have duties you must complete before applying to the Registrar in Bankruptcy.
QUESTION: What happens if I am unable to make my payments or fulfill my bankruptcy obligations?
- In order to meet the necessary requirement for discharge from bankruptcy, you must complete your obligations. Your Trustee will clearly outline these from the beginning and help you put together a game plan for their completion. If you are struggling for any reason, contact your LIT right away. Your Trustee is an excellent resource and may be able to extend the time timeline.
By reading this article, the bankruptcy process should be a lot clearer. If you want to learn more about your options, talk to a Licensed Insolvency Trustee. Your first meeting is free – we believe everyone deserves to know what their options are. Talk to a caring professional who understands what you are going through and how best to get you back on track. You won’t be pressured into anything you are not ready for. When you are ready, contact us.
To learn more about filing for bankruptcy in Alberta, visit the Bankruptcy page of our website.