Declaring bankruptcy is never a choice people want to make, however sometimes the burden of debt is just too much for a person to handle. Sometimes life has a way of throwing curve balls that we just can’t adapt to. Intentions may have been good at the onset of taking on debt, and then something has changed making repayment extremely unlikely. Or maybe the excessive debt is just the wake up call someone needs to regain control of their financial life. Either way, the following is a guide on declaring bankruptcy in Alberta.

Whatever the reason, declaring bankruptcy is a hard road to go down. It’s a decision that one shouldn’t enter into without weighing all the pros and cons and without knowing all the answers. This post will help people from Alberta with the specific rules and regulations of their province’s bankruptcy process.

Should You Declare Bankruptcy?

Even though you can declare bankruptcy with as little as $1000 of debt, bankruptcy is a long, hard process that shouldn’t be taken into for such a small amount. Realistically, a debtor should take a hard look on whether they legitimately can’t make their payments anymore. Steps should be taken with creditors to negotiate payments lower to give the borrower more flexibility. If a borrower is current on their payments (or even most of their payments) then other steps should be taken rather than bankruptcy.

If the borrower is actually drowning in debt, then bankruptcy is the only option left. Bankruptcy will kill a debtor’s credit rating, however that rating is probably pretty low already. Unfortunately, the process isn’t quite as easy as Michael Scott makes it out to be.

The First Step: Find A Trustee

If you’re declaring bankruptcy in Alberta, the first step is to find a trustee.The trustee will help the debtor prepare a Statement of Affairs, which lists all assets and liabilities, including a list of all debts included in the bankruptcy. The trustee is registered and licensed with the Government of Canada, meaning they have expertise and knowledge of the bankruptcy process. The borrower must pay the trustee for their assistance.

Typically, there aren’t many assets to speak of. If there are, the trustee is in charge of selling those assets.Certain assets are exempted though, including:

A small amount of equity in a principal residence ($40,000)
A reasonable amount of equity in one vehicle ($5000)
Clothing, furnishings and personal effects ($4000 each)
RRSPs, food and tools you need to earn a living are typically excluded as well.

Anything above and beyond is fair game for the trustee to sell.

The trustee will also provide debt counselling for the bankrupt client.The client will report their income on a monthly basis to the trustee in Alberta.

The trustee may also not suggest bankruptcy and will work with both the borrower and creditors on some sort of settlement.

What Payments Won’t Go Away

For those looking for the easy way out of all their debt obligations, bankruptcy won’t give them all what they’re looking for. The following debts will not be eliminated by a bankruptcy:

Any payments on a secured asset (a house or car)
Any child support or alimony payments
Any debts arising from fraud
Any debts assigned by the courtsAny student loan debt (if the debtor has been out of school for less than 7 years)
Any tax debt

Bankruptcy only covers unsecured debt.Credit cards, payday loans and other forms of high interest, unsecured debt are what will go away with a bankruptcy. Wages are also unaffected by a bankruptcy.

Once a borrower enters bankruptcy, creditors must deal with the trustee. Creditors cannot take a borrower to court or garnishee salary or a bank account once the bankruptcy process has begun.

How To Be Discharged

Once 9 months is over, the bankruptcy process will be over, as long as nobody has any objections. For a borrower to get a discharge, they must complete the process and credit counselling required by the law. They must also show the trustee the ability to handle their finances responsibly. Once all this has been completed, a discharge will be granted and the bankruptcy process will be over.


Bankruptcy is a process that should only be entered into as a last resort. Luckily for those thinking about it in Alberta, the province is more generous than many others about assets a bankrupt individual can keep. Once the process is done, rebuilding credit is no picnic. Getting a loan at anything but the highest interest rates is next to impossible for at least the next 3 years. If someone is serious about rebuilding their financial life after bankruptcy, then debt should probably be avoided at all costs.

Tell everyone, yo!