If you’re considering bankruptcy as an option to your debt situation, and your primary residence is in Alberta, there are some things for you to consider first. Here are answers to some questions that many of our clients ask us.
Will a declaration of bankruptcy lead to my wages being garnished?
Actually, the opposite is true – if you declare personal bankruptcy in Alberta, your creditors are not allowed to garnish your wages to that you maintain a reasonable living standard.
If creditors were already garnishing my wages before I declared bankruptcy, will my employer find out about my bankruptcy?
When you declare bankruptcy, your wages can no longer be garnished. We have to inform your employer of the bankruptcy so the garnishment will come to an end. This is one reason why declaring bankruptcy before garnishment begins can be a wise idea.
Do I have to make payments to my creditors during bankruptcy?
There are some cases when a part of your take-home pay is due to the Trustee of your bankruptcy for distribution to the creditors, after you file for bankruptcy. The exact amount of this payment will vary, depending on how many people are in your household, the total take-home pay in the home and if you owe non-discretionary expenses like child support or child care.
Does bankruptcy influence tax credits and GST refunds?
The Trustee has the right to seize tax refunds for the time period of your bankruptcy. GST refunds will go directly to the Trustee, although there are some cases in which they will come back to you. You will have to transfer any provincial tax credits from the bankruptcy year to the Trustee, and federal tax credits will go straight to the Trustee.
What about money that the provincial and federal government provide for my children?
Bankruptcy declarations never affect family allowances; you will be able to keep those.
Could the Trustee seize my RRSPs or my retirement pension?
Pensions are exempt from bankruptcy seizure in Alberta, and Trustees may not seize RRSPs in this province either. There is also no requirement that you give up contributions that you made in the last year.
Can I stop paying my student loans after I declare bankruptcy?
If you finished with school more than seven years ago, this loan turns into a dischargeable debt in bankruptcy, so you no longer have to make payments on it. If you left school more recently, you still have to make the loan payments.
Can I keep any of my personal assets if I declare bankruptcy?
Alberta law allows you to keep certain types of personal property in the event of bankruptcy. To see what you do not have to forfeit, take a look at this list.
Can I lose my share of an inheritance if I declare bankruptcy?
The Trustee may seize your share of an inheritance, although some exceptions exist.
How long does it take for a bankruptcy discharge to come through?
If this is your first bankruptcy, it only takes nine months to get a discharge from your bankruptcy – or 21 months if your income is higher than what the province has established as a reasonable living standard. If this is your second bankruptcy, it can take two to three years. If your tax debt is over $200,000, and if that constitutes more than 75% of your total debt, no automatic discharge is available; instead, the Trustee will have to put in an application with the bankruptcy court. If you are a director, your debt obligations to the company are not part of those calculations.
How long does a credit score influence my credit score?
Different credit agencies view bankruptcy in different ways. You can expect a first bankruptcy to influence your credit score for six years after discharge, and a second bankruptcy to affect it for 14 years after discharge. However, there are ways to start rebuilding your credit before that time period elapses.
Is there a limit to the number of times that I can declare bankruptcy?
There is no legal maximum. However, after your third declaration, you have to file your discharge application with the court, and the judge has the option of rendering a judgment that extends the period or orders you to pay more money.
Is it possible to annul a bankruptcy?
If you pay your creditors back the total amount of the debt and file a petition with the bankruptcy court, an annulment is possible. If you make a consumer proposal to your creditors while you are in bankruptcy and they accept it, an annulment is also possible.
Can I keep on managing a company after declaring personal bankruptcy?
You can keep on managing your company if it is not incorporated, or if you own your own business and are self-employed. However, if the company is incorporated, you may not serve as a director if you have declared bankruptcy.
To get more information about your own situation, talk to a bankruptcy trustee. Remember that a consumer proposal can provide a better solution than a debt settlement. If the proposal goes through correctly and the borrower has enough equity, you can come out of your consumer proposal within a few months and find yourself back on track, while a bankruptcy has implications that will affect your credit profile for years.