**First word – Please note that Albertalending.ca is NOT a Bankruptcy Trustee, and the following notes are general information only. The services provided by Albertalending.ca relate to utilizing home equity to consolidate debts, as a possible alternative to avoid claiming bankruptcy.** -Thanks!
Are you a candidate for bankruptcy? Read below if you are considering it. I would also encourage you to contact me to see if debt consolidation is a possibility – This could result in you, the homeowner, keeping more of your equity than if you filed for bankruptcy protection. All information is kept in confidence.
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.
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.
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.
• 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, where the debtor is a bona fide farmer and whose principal source of livelihood is farming.
• 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).
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.
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.
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 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 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?
Your home equity may be the key to resolving this situation. Contact me for a confidential analysis.