Understanding Bankruptcy in Calgary, Alberta: A Guide

Understanding Bankruptcy in Calgary, Alberta: A Guide

Bankruptcy is a legal process that allows individuals or businesses unable to meet their financial obligations to either eliminate or repay their debts under the protection of the bankruptcy court. In Calgary, Alberta, as in other parts of Canada, bankruptcy is governed by federal law, specifically the Bankruptcy and Insolvency Act. This article provides a comprehensive overview of the bankruptcy process in Calgary, including who it’s for, how it works, and what consequences it entails.

Who is Bankruptcy For?

Bankruptcy is typically considered a last resort option for individuals or businesses in Calgary that are insolvent. Insolvency means that a person or entity is unable to pay their debts as they come due. This can include situations where the total liabilities exceed the total assets. Bankruptcy is designed to provide a way out for those who cannot feasibly pay off their debts, offering them a fresh financial start while ensuring that creditors receive as much of what is owed to them as possible.

How Does Bankruptcy Work in Calgary?

The bankruptcy process begins when an insolvent individual or business in Calgary files for bankruptcy through a Licensed Insolvency Trustee (LIT). LITs are federally regulated and have the authority to administer bankruptcies. They work with the debtor to compile all necessary financial information, including assets, liabilities, income, and expenses. The LIT will then file the bankruptcy paperwork, and upon filing, an automatic stay of proceedings is put in place, which stops most creditors from being able to pursue legal actions against the debtor to collect debts.

Throughout the bankruptcy, the debtor may need to surrender certain assets to the LIT, who will sell them to pay back creditors as much as possible. There are, however, exemptions under Alberta law that allow individuals to keep essential belongings within certain limits, such as personal clothing, household furnishings, and in some cases, a vehicle.

Debtors are also required to perform certain duties during bankruptcy, like attending two financial counseling sessions, and they might need to make surplus income payments if their income exceeds a certain threshold. After fulfilling all requirements, individuals are usually discharged from bankruptcy within nine to 21 months, meaning they are no longer legally responsible for the debts included in the bankruptcy (with some exceptions like alimony and child support).

Consequences of Bankruptcy

Filing for bankruptcy has both immediate and long-term consequences. Immediately, the automatic stay of proceedings provides relief from creditors, but it also means relinquishing control of significant financial decisions to the LIT. Long-term, a bankruptcy filing remains on an individual’s credit report for at least six years after discharge for a first bankruptcy in Calgary. This can affect the ability to obtain credit, secure housing, and sometimes impact employment opportunities.

Despite these consequences, bankruptcy can offer a valuable second chance for those who find themselves in untenable financial situations, allowing them to wipe the slate clean and start over.

Conclusion

Understanding the ins and outs of bankruptcy in Calgary can help individuals and businesses make informed decisions about their financial future. It’s a complex process with serious implications, but for those drowning in debt, it can provide a pathway to regain financial stability. Consulting a Licensed Insolvency Trustee is a crucial first step for anyone considering this option to ensure they understand the process, their rights, and the impacts it may have on their life.