What Happens When You Declare Bankruptcy in Alberta?

When it comes to debt resolution, there are a few options to consider. Declaring bankruptcy is often the quickest and least expensive route to take. Our team is knowledgeable and ready to help you through your financial crisis. Here’s what happens when you decide to file for personal bankruptcy:

Meet with a Licensed Insolvency Trustee

The first step in declaring personal bankruptcy in Alberta is to contact a Licensed Insolvency Trustee (LIT). They will assess your financial situation and discuss if filing for bankruptcy is indeed the best option. In Canada, only a LIT can file bankruptcy paperwork. Those forms go to the Office of the Superintendent of Bankruptcy in Ottawa, which will then inform your creditors of the bankruptcy status.

Stay of Proceedings

Once an LIT has filed on your behalf, there is a Stay of Proceedings. This means you are protected from wage garnishees and lawsuits. Unsecured creditors can also no longer contact you. Any communication must be done through the LIT, and they will handle any negotiations or issues that may come up.

Fulfill terms of bankruptcy

There are certain tasks you’re legally obligated to do during the personal bankruptcy process. Occasionally, a meeting of creditors is requested to allow creditors to get information about the bankruptcy, or discuss matters with the LIT. If a meeting happens, you are required to attend. 

You must also send the LIT proof of income each month, and make monthly payments. Plus, you are required to attend two credit counselling sessions, where you’ll learn money management tactics to assist you in the future, and determine the causes of your bankruptcy so you can avoid going through the process again. 

You may also be required to make surplus income payments to your LIT. This is the part of your monthly earnings that exceeds what is required to maintain a reasonable living. This amount is set by the Office of the Superintendent of Bankruptcy. Your LIT will discuss with you the specific terms of your surplus income payments, should that apply to you. 

Discharge from bankruptcy

Factors like surplus income payments and whether or not you’ve filed bankruptcy before can impact the timing of your bankruptcy discharge. The shortest terms are nine months, and the more complicated bankruptcies are 36 months. A discharge releases you from any legal obligation to pay back the debts you had at the beginning of the bankruptcy term. 

When you receive a Notice of Discharge from your LIT, it’s over. There will be a note about the bankruptcy on your credit report for six years.

Rebuild your credit

Once your personal bankruptcy has ended, it’s time to start building back your credit. Even with a note on your credit report, you can still get credit from some lenders. Contact us today to determine your next steps to a fresh start!