Bankruptcy Alberta: Filing for Bankruptcy in Alberta

If you’re experiencing financial difficulty in Alberta and are unable to keep up with debt repayments, bankruptcy might provide the fresh start you need.

Here’s what you need to know about filing for bankruptcy in Alberta.

What is bankruptcy?

Bankruptcy is a legal process under the Bankruptcy and Insolvency Act that allows you to eliminate debts you can’t repay.

When you file for bankruptcy, a Licensed Insolvency Trustee is appointed to take control of your assets and work with your creditors to settle your debts.

Most debts are eliminated, including credit cards, personal loans and payday loans.

You are legally protected from your creditors and no longer required to pay your unsecured debts once the bankruptcy process is completed.

What happens when you file for bankruptcy in Alberta?

Here’s what to expect when declaring bankruptcy in Alberta.

1. Meet with a Licensed Insolvency Trustee

A Licensed Insolvency Trustee will review your financial situation by examining your income, expenses, debts, and assets.

Next, they will explain all the options available to you. If a formal debt solution is the best approach, they will determine whether a consumer proposal or personal bankruptcy is more suitable.

Your LIT is bound by a code of ethics, and their job is to answer your questions and assist you in resolving your debts without pressure or judgment.

Your first meeting with a Licensed Insolvency Trustee (LIT) is always free. You are under no obligation to proceed.

A Licensed Insolvency Trustee (LIT) was formerly called a “Bankruptcy Trustee,” “Trustee in Bankruptcy,” or “Licensed Bankruptcy Trustee.” The name changed in 2016 to reflect a LIT’s broader role beyond just bankruptcy.

LITs are the only professionals authorized in Canada to file bankruptcies and consumer proposals.

2. File your bankruptcy

Your Licensed Insolvency Trustee will need specific information and documents that prove your identity.

You’ll provide a list of all assets (home, vehicle, bank accounts, RRSPs, pensions), all debts and creditors, your income and expenses, and recent tax returns.

Your LIT will prepare the necessary bankruptcy forms, including an Assessment Certificate (confirms you received proper advice), Statement of Affairs (summary of assets and liabilities), Monthly Income and Expense Statement, and Assignment for General Benefit of Creditors (the official bankruptcy filing).

You will review all documents with your LIT before signing, and everything will be explained in detail.

Once you sign the bankruptcy documents, your LIT files them electronically with the Office of the Superintendent of Bankruptcy. Doing so triggers an immediate Stay of Proceedings, which means unsecured creditors and collection agencies must stop contacting you immediately.

Wage garnishments are lifted, legal proceedings stop, and interest charges are frozen. From this point onwards, communication goes through your LIT.

From here, you can breathe a little easier knowing that the calls will stop and legal action will cease.

3. Make monthly payments

As of 2025, most people filing personal bankruptcy pay around $200/month for 9 months. If you earn above a certain income threshold, you’ll pay more (called surplus income payments).

Surplus income payments apply if your income exceeds the government thresholds. These additional payments are paid into the bankruptcy estate to repay creditors.

4. Perform some bankruptcy duties

When declaring bankruptcy, you have some responsibilities during the process.

You must attend two credit counselling sessions, as required by law, to help you avoid future financial problems.

Every four weeks, you have to submit income and expense statements to your LIT, who uses this to calculate surplus income payments.

Your LIT files your tax returns before and after bankruptcy, and refunds go to the estate.

You must surrender non-exempt assets, which are sold. However, there are protected assets totalling $40,000 in home equity and $5,000 in vehicle equity.

5. Get discharged

After 9-21 months, your debts are eliminated, and you can start rebuilding your credit.

If your discharge is opposed, your LIT can apply to the court on your behalf, which will either grant the discharge or set conditions.

Bankruptcy stays on your credit report for 6-7 years after discharge.

What can you keep during bankruptcy in Alberta?

Your Licensed Insolvency Trustee will sell assets that exceed Alberta’s exemption limits, with the proceeds going to your creditors.

However, there is a list of exempt property, called bankruptcy exemptions.

Alberta offers some of the most generous bankruptcy exemptions in Canada. Most people keep their home, vehicle, and household items.

Here’s what you can keep:

• Food (you and your dependents) for the next 12 months.
• Home equity up to $40,000 (one of the highest in Canada).
• One motor vehicle valued at up to $5,000.
• Clothing (you and your dependents) up to a value of $4,000.
• Household furnishings and appliances up to a value of $4,000.
• All medical and dental aids (you and your dependents).
• Home equity up to $40,000 (one of the highest in Canada)
• Up to 160 acres of land if your principal residence is located on that land. The land must be part of your farm.
• The personal property needed for farming operations over the next 12 months.
• Tools for your trade (tools, operating equipment and resources needed to make money) up to $10,000.
• Social allowance, handicap benefit or a widow’s pension if the proceeds are separate from your other funds.
• RRSPs (Registered Retirement Savings Plans), except contributions in the last 12 months.
• RESPs, RRIFs and pension plans.
• Life insurance policies. (if the beneficiary is the spouse, child, grandchild or parent of the policy owner.)

These exemptions are based on liquidation value, not what you paid for items. For example, your furniture might have cost $20,000 new, but its garage sale value might be only $2,000.

What will I lose during bankruptcy in Alberta?

You may lose assets that exceed the exemption limits above. For example:

• If your home has more than $40,000 in equity
• If you own multiple vehicles
• If you have significant investments outside RRSPs
• If you own recreational properties or second homes

If you have assets worth more than the exemptions, a consumer proposal might let you keep everything while still reducing your debt repayments.

Will I lose my house if I file bankruptcy in Alberta?

Probably not. Alberta protects up to $40,000 in home equity. If your equity is below this amount, you can keep your home by continuing to make mortgage payments.

For example, if your home is valued at $400,000 and you owe $375,000, you have $25,000 in equity. Therefore, you can keep your property since the equity is below $40,000.

If your equity exceeds $40,000, you’d need to pay the excess amount to your LIT, or consider a consumer proposal instead.

Will I lose my car if I file bankruptcy in Alberta?

You can keep one vehicle with up to $5,000 in equity. If you owe more than your car is worth, you can keep it by continuing your car loan payments.

You can keep your car if:

• It has less than $5,000 in equity
• You continue making car payments on time
• You’re making bankruptcy payments to your LIT

You may lose your car if:

• It has more than $5,000 in equity
• You own multiple vehicles

Alternatives to bankruptcy in Alberta

Filing for bankruptcy should be your last resort. Consider these alternative solutions first:

Consumer Proposal

A consumer proposal is a legal debt settlement that lets you keep your assets while reducing your total debt by up to 80%. Monthly payments are fixed and affordable, typically over 3-5 years.

This option is often better for those with higher income or significant equity.

Orderly Payment of Debts (OPD)

There’s also a formal debt solution in Alberta called the Orderly Payment of Debts (OPD) program, which consolidates unsecured debts into a single, legally binding payment plan with a 5% interest rate.

Debt Consolidation

A debt consolidation loan lets you combine multiple debts into one lower payment. Requires good credit and stable income.

Credit Counselling

Non-profit counselling can help negotiate lower interest rates with your creditors.

Not sure which option is right for you? Take our free debt quiz.

Bankruptcy Alberta FAQs

Find out more about filing for bankruptcy in Alberta

Speak with a Licensed Insolvency Trustee in Alberta today. Free consultation, no obligation.

Serving Edmonton, Calgary, Red Deer, and all of Alberta.