Understanding the Personal Bankruptcy & Consumer
Proposal Processes

Bankruptcy and consumer proposals are legal processes that provide relief from debt. To file bankruptcy, a debtor must owe $1,000 and be unable to pay their debts as they become due. All assets vest (belong) to the Trustee for the general benefit of the creditors. A consumer proposal is available to those debtors (individuals) that owe less than $250,000, excluding residential mortgage, and can complete the terms of the proposal within five years. Assets do not vest (belong) to the Administrator. Either option must be filed through a Trustee in bankruptcy such as Fox-Miles & Associates Inc. in Edmonton.

Stop the Collection Process

The personal bankruptcy process is a minimum of nine months, whereas the consumer proposal terms can extend up to five years. Either process initiates a “Stay of Proceedings,” which stops the collection process, with exception to secured creditors. Section 178 of the Bankruptcy and Insolvency Act lists debts that “survive” bankruptcy and these include, but are not limited to: court fines, alimony, child maintenance, debts arising from fraud, embezzlement, misappropriation, and student loans (if you have been a student in the last seven years). For information on “surviving” debts, call Fox-Miles & Associates at 780-444-3939.

Financial Options

Depending on your financial situation, the following options are available to you:

In Alberta, the following items are exempt from seizure:

  • Household furniture and appliances, $4,000
  • Clothing and personal effects, $4,000
  • Motor vehicle, $5,000 equity
  • Tools of trade, $10,000 equity
  • House (occupied), $40,000
  • RRSPs

Effects on Your Credit Rating

Filing a bankruptcy or a proposal does affect your credit rating and is kept on your credit rating for a certain period of time, up to six years. Most individuals can get loans after bankruptcy, providing they qualify for the loan according to the financial institutions’ qualifications. Some financial institutions want to wait a period of time after the bankruptcy before considering granting unsecured loans to individuals. Remember that you are rebuilding your credit rating if you are continuing to pay your house mortgage or car loan.

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