What You Can Keep In Bankruptcy In Alberta

Alberta’s laws are some of the most generous in the country, in terms of allowing bankrupt individuals to keep assets to help them in the re-building process. But this isn’t just about generosity – these rules help reduce a bankrupt’s reliance on government and community supports while they work to regain their financial footing. The exemptions set out in the Civil Enforcement Act and its regulations are intended to ensure that individuals can maintain a basic standard of living and continue their lives with dignity. Some of the key exemptions in Alberta bankruptcy include:

1. Primary Residence: In Alberta, home owners can typically retain up to $40,000 in equity in their primary residence. However, the exemption must be shared between co-owners of jointly-held property.
2. Personal Effects: Personal belongings, such as clothing, household furniture, and appliances, are exempt from seizure in bankruptcy provided that their forced sale value (as opposed to replacement value or purchase price) is less than $8,000 ($4,000 for clothing, and $4,000 for furniture and appliances).
3. Tools of the Trade: Individuals who rely on specific tools or equipment to earn a living may be entitled to retain these assets in bankruptcy, at a forced sale value of up to $10,000. This can include a vehicle that is used for work.
4. Vehicle: Debtors in Alberta may be able to retain a personal vehicle with a value of up to $5,000. If there is a secured loan against the vehicle, only the net equity that you’ve built up is considered in the valuation.
5. Property in a registered plan: Funds or investments which are held in a registered plan, like an RRSP, RESP, or RDSP, are exempt. However, any payments out of such a plan are not.

This list is not exhaustive, nor is it definitive. All of the above exemptions are subject to specific rules and exceptions. Therefore, you should talk to a Licensed Insolvency Trustee to see which of your assets may be exempt and how this might impact your options for dealing with your debt. In addition, a Licensed Insolvency Trustee can tell you what portion, if any, of your income will have to be turned over while you're in bankruptcy - again this is highly dependent on your specific situation.

If you are dealing with overwhelming debt and are considering selling, transferring or otherwise dealing with your assets, you should seek advice prior to taking these actions, as the actions you take can impact your path out of debt and your ability to re-build.

Bankruptcy can be a lifeline for people who are experiencing significant financial distress. While bankruptcy isn’t always the right option for an individual facing overwhelming debt, when it is, an LIT can assist you with filing the bankruptcy, navigating the process, and starting to re-build.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the southern Alberta region. We regularly help individuals review their options for dealing with overwhelming debt, and where appropriate we support them through a bankruptcy filing and help them get set up for future success. If you'd like to know what bankruptcy would look like for you, please reach out to us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.