Navigating the Bankruptcy Process in Alberta with a Licensed Insolvency Trustee
For Albertans struggling with debt and in need of help getting back on their feet, filing for bankruptcy or a consumer proposal may be an option. It’s important to understand the process and the associated risks before making a decision, and one of the best ways to do this is by working with a Licensed Insolvency Trustee (LIT). When looking at each province, Alberta stands out as, for Alberta consumer proposals are more popular than bankruptcy. Many Albertans may be facing this difficult choice in dealing with their debt, as a result of the impacts of Covid over the last few years, decreased employment opportunities combined with increases in the cost of food, utilities, and interest rates for renewing mortgages or new loans. These factors are contributing to not being able to pay your bills on time and in some cases at all.
What is a Licensed Insolvency Trustee?
An LIT is an individual who has been licensed by the Government of Canada to administer bankruptcies and consumer proposals. They are the only professionals in Canada who can legally act as a trustee in bankruptcy and as an administrator in a consumer proposal and also help individuals and businesses with credit counseling, debt consolidation, and other financial services. By working with an LIT, debtors can receive the necessary guidance and advice to make informed decisions about their finances. A LIT does not charge a fee for a consultation to review your situation and recommend a course of action.
Unsecured Debt and Bankruptcy
When it comes to bankruptcy, there are essentially two types of debt: secured and unsecured. Secured debt is any loan, line of credit or mortgage that is backed by collateral, such as a home or car, while unsecured debt is any debt that isn’t backed by collateral. Unsecured debt can include contractual debt including credit cards, payday loans, personal loans, unsecured lines of credit, personal guarantees on loans and personal income tax and GST debt. It can also deal with statutory debts resulting from you operating a company for the director liabilities that arise from unpaid source deduction remittances and GST remittances or on personal guarantees that have been pledged on the corporate loans. When filing for bankruptcy, all unsecured debts must be disclosed and included in the bankruptcy process.
How to File for Bankruptcy
The bankruptcy process in Canada is complex and involved, and it’s important to understand the steps involved in filing for bankruptcy. The first step is to meet with an LIT to discuss your financial situation and determine if bankruptcy is the best option for you. The LIT will review your financial documents and advise you on the best course of action.
Once you and your LIT have decided that bankruptcy is the best option for your situation, you will need to prepare and submit legal documents to the Office of the Superintendent of Bankruptcy Canada. The LIT will assist in this process by preparing and filing the documents on your behalf based on the information you have disclosed to them. The documents submitted include a Statement of Affairs, which provides an overview of your assets and debts, as well as a Statement of Income and Expenses, which outlines your income and expenses on a monthly basis. Once the documents are filed with the Office of the Superintendent of Bankruptcy, the LIT will then notify all of your creditors and provide them with the documents that they will need in order to file their paperwork with respect to the debt that is owed to them. Important in this process, is that on filing of a bankruptcy, a stay of proceedings is put into effect that prevents a creditor from commencing or continuing any action against you to collect the amount owed to them and they must now deal through the LIT who is administering your file.
Voluntary Assignments
An assignment in bankruptcy is typically referred to as a voluntary assignment, as it is your choice to file for bankruptcy. In rare occasions, your creditors may petition the Court to have you assigned into bankruptcy.
Preparing and Submitting Legal Documents
Once you have completed the legal documents, the Trustee will submit them to the Office of the Superintendent of Bankruptcy Canada and notify your creditors of the assignment in bankruptcy. In rare circumstances you may have to attend a meeting of creditors, where you will answer questions about your financial situation. After the meeting, your LIT will work with you to come up with a plan for managing your debt and assets.
The Bankruptcy and Insolvency Act
The Bankruptcy and Insolvency Act (BIA) is the federal legislation that governs bankruptcies in Canada. It outlines the rights and obligations of debtors and creditors, as well as the process for filing for bankruptcy. It is important to understand your obligations under the BIA and how it applies to your situation before filing for bankruptcy. The Trustee will review your obligations under the Act with you.
Bankruptcy and Credit Reports
When you file for bankruptcy, it will be noted on your credit report, which will affect your credit score and make it difficult to get a loan or line of credit in the future until such time as you have undertaken to rehabilitate your credit score. As part of the bankruptcy process, you will be required to attend two mandatory counseling sessions, one of which is focused on budgeting, and the second of which is focused on spending habits, understanding credit and how to go about rehabilitating your credit.
Bankruptcy Discharge
Once you have completed the bankruptcy process, your debt will be discharged, meaning that you are no longer legally responsible for the debt and your creditors cannot take any action against you. However, not all debt is eligible for discharge, and some debts, such as fines and penalties imposed by a Court, alimony and child support and student loans, may still be owed after bankruptcy.
After Bankruptcy
Once you’ve been discharged from bankruptcy, there are a few things you can do to ensure that you don’t find yourself in the same situation again. Start by creating a budget and tracking your spending to make sure you’re not overspending or taking on more debt than you can handle. It’s also a good idea to start building your credit back up by making regular payments on time and taking out low-interest loans.
Conclusion
Filing for bankruptcy in Alberta can be a complicated process and it’s important to understand the risks and potential consequences before making a decision. Working with a Licensed Insolvency Trustee can help you navigate the process and make informed decisions about your finances. With the right advice and guidance, you can get back on your feet and start rebuilding your credit.
Even if bankruptcy is not your choice in dealing with your debts, you should be aware of how a bankruptcy would work for you and be advised of all of your options. The Trustee will review this option during your free consultation. 
A consumer proposal is an offer of settlement to your unsecured creditors at less than face value of the debt owed. A proposal offers a percentage of the amount owing to the creditors but something more than they would receive if you were to file for bankruptcy. 
