Alberta Bankruptcy FAQs. Bankruptcy Q and A; Bankruptcy Questions and Answers.
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Bankruptcy is a Federal law and except for Exemptions, which are set by the provinces and territories, is applicable to all provinces and territories.
What is Bankruptcy? Please see this PowerPoint Presentation.
Briefly, the steps are:
• Choose an Alberta Trustee.
• The Trustee will help you prepare a Statement of Affairs which lists all of your assets, creditors, income, expenses, and other pertinent information
• After you file bankruptcy, most creditors are no longer able to pursue you for collection of their accounts.
• You may be requested to attend a bankruptcy interview with the Official Receiver who is a government official.
• You will be required to attend two financial counselling sessions.
• If you have any assets which you will not be allowed to keep (see Bankruptcy Exemptions), you will be expected to help the Trustee sell them.
• You will report your income and expenses on a monthly basis to the Trustee. You may also be required to pay some money to the Trustee each month depending upon how much you earn, the size of your family and your circumstances.
• You will be automatically discharged from bankruptcy in 9 months if this is your first bankruptcy and there are no objections. You will have no further obligations for the debts covered in your bankruptcy.
Who can File Bankruptcy?
• You can file bankruptcy or make a proposal if:
• You are not presently in bankruptcy and;
• You owe at least $1,000 and;
• You are not able to meet your regular payments as they become due; or
• You would not be able to pay all of your debts if all of the assets you are not allowed to keep are sold.
• Your company, partnership, or business may also file bankruptcy or make a proposal if it meets the above requirements.
• You should be aware that any unsecured creditor to whom you owe more than $1,000 could try to force you into bankruptcy. This is called a petition in bankruptcy. In this case, the creditor must prove that you have committed an act of bankruptcy, such as not paying your bills as they came due. The court reviews the facts and, if the petition is allowed, issues a receiving order which places you in bankruptcy with a trustee selected by the petitioning creditor.
What is a Trustee in Bankruptcy?
The website of the Superintendent of Bankruptcy describes trustees in bankruptcy as follows:
"A trustee in bankruptcy is a person licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies and manage assets held in trust. The trustee can give a debtor information and advice about both the proposal and bankruptcy processes and make sure that both the debtor's rights and the creditor's rights are respected."
Will my Creditors Stop Harassing me?
Once a bankruptcy has been filed your creditors are prevented from contacting you and making any collection attempts. Your creditors will be prevented by law from contacting you.
Who Will Know?
In most cases no-one will find out that you have filed for bankruptcy. Only in cases with significant assets will there be a notice placed in the newspaper. This notice will be in the legals section.
How is my spouse affected?
A party can only be held responsible for repayment of a debt if they signed the original contract, loan agreement or credit card application. If your spouse or partner never signed the original contract or requested a credit card, they cannot be held responsible for the debt. In Canada, marriage alone does not make you responsible for your spouse's debts.
Can my bank refuse to let me open a bank account or cancel my existing account?
No. They cannot. If your bank cancels or refuses to open a bank account for you because you have been or are in bankruptcy they are breaking the laws of the land. The law is set out in Sections 3, 4 and 5 of the Access to Basic Banking Services Regulations of the Bank Act.
The Financial Consumer Agency of Canada (FCAC) is responsible for enforcing these regulations, which will make the rules for obtaining a basic personal bank account clearer for Canadians. For example, a bank can not refuse to open a basic personal account for you just because:
• You don't have a job;
• You are or have been bankrupt;
• You're not depositing money into the account.
• A bank must also cash most Government of Canada
cheques for non-customers at no charge.
Call 1-866-461-3222 or e-mail the Financial Consumer Agency of Canada If you believe that a financial institution has breached a consumer law.
With respect to credit cards, there are two ways in which the second party can be held responsible for repayment of the debt. One is where the individual actually requests a secondary card and signs an agreement saying they accept full responsibility for current and future debt. The other is where the credit card company sends a card out in the second individual's name with the primary cardholder's number and the second individual actually signs and uses the card. Use of the card will hold the secondary person responsible for any past and or future debt.
Should you wish to remove your spouse or partner from your credit card or loan document, you must get confirmation in writing from the financial institution. If you do not obtain written confirmation, there is no guarantee the institution has removed the second party from their records.
Also, responsibility for debt between spouses as listed in a separation or divorce agreement does not legally bind a financial institution or creditor. Unless you obtain concurrence to the division and re-assigning of responsibility of debt from the creditor, they have the right to pursue anyone who signed on the debt.
What do I do if I have Canadian debt but now live in a foreign country?
Canadians living abroad can go into bankruptcy or file a proposal for their Canadian debt in the following ways:
They can go bankrupt in their country of residence. This will free them of the Canadian debt so long as they live in that foreign country. If they return to Canada that debt will have survived and they will still owe that money.
They can re-establish residency in Canada and then go bankrupt or file a proposal in Canada;
They can go bankrupt or file a proposal under Canadian law while still living in that foreign country if: They have property in Canada (re: definition of "insolvent person") "Property" includes money, goods, things in action, land and every description of property, whether real or personal, legal or equitable; or if they have carried on business in Canada in the preceding year (re: definition of "insolvent person" and definition of "locality of a debtor").
If you think you qualify to go bankrupt or file a proposal while living in that foreign country the next step would be to fill out our Information Form and then contact us if you used to live in Alberta.
How much am I allowed to keep?
Alberta bankruptcy exemptions or assets you keep in a bankruptcy or a proposal are set by the Alberta government and are the most generous exemptions in Canada.
The property exempt from seizure applies to the equity in the asset. Equity is the excess that the value of an asset has over any charges or encumbrances against that asset.
For example, if you have a car worth $10,000 and there is a $6,000 secured debt against it then the equity in the car is $4,000. In Alberta the exemption for a car is $5,000 so in this example you are entitled to the equity of $4,000 and the unsecured creditors cannot take this.
Property Exempt from Seizure:
• Food required by the debtor and his/her dependants during the next 12 months
• Necessary clothing of the debtor and his/her dependants up to a value of $4000.00
• Household furniture and appliances up to a value of $4000.00
• One motor vehicle not exceeding a value of $5000.00
• Medical and dental aids required by the debtor and his/her dependents. Where the debtor is a bona fide farmer and whose principal source of livelihood is farming.
• 160 acres if the debtor's principal residence is located on that 160 acres and that the 160 acres is part of the debtor's farm
• The equity in the debtor's principal residence, including a mobile home, up to a value of $40,000.00. If the debtor is a co-owner of the residence, the amount of the exemption is reduced to an amount that is proportionate to the debtor's ownership interest.
• Personal property (i.e. tools, equipment, books) required by the debtor to earn income from the debtor's occupation up to a value of $10,000.00
• Where the debtor's primary income is from farming operations, personal property required by the debtor for the proper and efficient conduct of the debtor's farming operations for the next 12 months.
• Registered Retirement Savings Plans RRSPs, Registered Retirement Income Funds (RRIFs), Registered Disability Savings Plans (RDSP) and Deferred Profit Sharing Plans (DPSPs). NOTE: This went into force in Alberta on October 1, 2009.
What don't I keep?
The bankruptcy laws provide that a person filing bankruptcy will be allowed to keep a certain amount of their property, as set out by the AB bankruptcy exemptions. Any assets, or property, you own that is above the exemptions as set out by the province must be turned over to the bankruptcy trustee.
How do I go into bankruptcy?
There are two ways a person can go into bankruptcy. The most common way for a person to go into bankruptcy is to voluntarily assign themselves into bankruptcy with a trustee. In rare cases, the court may order that a person must be declared bankrupt.
What about my wages during bankruptcy?
The trustee in bankruptcy will collect any wages over a reasonable level for living that will be paid into the bankruptcy estate.
When is my bankruptcy over?
The length of your bankruptcy case will depend on whether you have excess income and whether you are filing for bankruptcy for the first time or the second. First time filers without excess income will be discharged in 9 months, while those first time bankrupts with excess income will be discharged in 21 months (although the court may order more time.) Second time bankrupts with no excess income will be discharged in 24 months, and those second time filers with excess income will be discharged in 36 months. "Excess income" is deemed as required monthly payments of over $100 a month.
Can a bankruptcy help alleviate the terrible stress I am under?
Stress is alleviated for a number of reasons. Probably the major reasons are the stay of proceeding and the fact that the trustee will deal with your creditors allowing you to get on with your life.
Will I end up with a better credit rating if I use a credit counsellor?
You will likely end up with a better credit rating by using a trustee because you will be on a payment plan with a bankruptcy trustee that will be recorded by the Credit Bureau. By filing bankruptcy, people often receive a better credit rating faster than by using a counsellor.
What is financial counselling and do I have to take it?
You must take financial counselling in order to be eligible for an "automatic nine month discharge". The first counselling session must be held between 10 and 60 days following bankruptcy; the second counselling session must be held no later than 210 days following the date of bankruptcy. The cost for this is $85, plus GST, for each counselling session.
What happens during the bankruptcy?
The bankrupt will be responsible for providing the trustee with information about their living situation and finances, and any changes to either their finances, living costs, or if they move. The bankruptcy trustee will be required to provide the bankrupt with any necessary forms and to let the bankrupt know any information they must supply.
What about alimony and maintenance?
Bankruptcy does not affect your alimony or any other maintenance payments; these payments must still be made as agreed once bankruptcy is filed.
What about student loans?
Student loans may only be discharged in bankruptcy if the debtor stopped being a student (either full time student or part time) more than 7 years prior to filing bankruptcy.
Contact for Additional Assistance with Your Student Loan Concerns
Speak to an Alberta Trustee. about how we can help you with your Student Loan concerns as they affect a bankruptcy or proposal.
Or, for further clarification contact:
National Student Loans Service Centre
Public Institutions Division: 1-888-815-4514
Private Institutions Division: 1-866-587-7452
What about Canada Revenue Agency (CRA) debt?
CRA's position is that they, after taking appropriate steps, can register as a secured creditor against real property (real estate) or personal property (furniture or a vehicle, etc.) of a debtor.
What does CRA have to do in order to effect a secured claim?
Ninety days after an assessment, if there is no appeal lodged, CRA can make application to the Federal Court to have a judgement issued. CRA then must register a secured claim under the person's name under the Personal Property Security Registry. CRA, if real property is involved, will also register under Land Titles.
What do you do if you think that CRA is going to register a secured position against you?
If the debt is large enough, you should see an insolvency lawyer or a Trustee immediately. A search of the Personal Property Security Registry or land titles will reveal whether CRA has filed a secured claim against you. You may want to consider filing for bankruptcy or consider filing a proposal under the Bankruptcy and Insolvency Act.
N.B. CRA has advised that:
(a) they will honour provincial exemptions;
(b) they started registering their security position on or about May 1, 1999.
What debts are erased in a bankruptcy?
All unsecured debt is erased in a bankruptcy except for the following:
• Fines imposed by a Court;
• Money owing for things stolen;
• Things obtained by misrepresentation;
• Alimony or maintenance payments.
• Award of damages by a court for intentionally inflicting bodily harm or sexual assault.
• Student loans if bankruptcy is filed prior to or within seven years after the finish of studies.
What does it cost?
Will I ever get credit again?
Yes, you will get credit again! After you have been discharged from bankruptcy or completed your proposal, you may be a good credit risk, since you have no debt. The bankruptcy and proposal laws of Canada are intended to give you a fresh financial start. The ability to rebuild credit is part of that new start. For more information please click here.
What are the danger signs of Bankruptcy?
• Are your creditors constantly contacting you for payment of overdue bills?
• Are you always paying only the minimum balance on your credit cards?
• Do you take cash advances from your credit cards or borrow money from family or friends to pay your regular monthly living expenses?
• Are your wages being garnished or your assets seized?
• Are bill collectors or collection agencies calling you at work for payment of your bills?
• Do you constantly pay interest and service charges on all your debts because you can't pay on time?
• Do you spend more than 40% of your take home pay on your rent or mortgage, house maintenance and utilities?
• Are you always making arrangements with your creditors to catch up on missed payments?