Canada Bankruptcy Laws How They Can Help with Financial Difficulty in Edmonton
Most residents in severe financial difficulty in Edmonton think Canada bankruptcy laws are limited to bankruptcy protection. Those who take the time to investigate different solutions for dealing with mounting debt read they should only consider bankruptcy as the last possible resort. So why bother to learn more about Canada bankruptcy laws?
The Bankruptcy and Insolvency Act of Canada (BIA) does include the requirements and responsibilities for eliminating debt through a declaration of personal bankruptcy. The laws recognize a fact many of us in financial trouble forget – there are two sides involved. If you cannot pay one or more of your bills, somewhere out there is a creditor who is losing money.
Canada bankruptcy laws provide debtors the opportunity essentially to walk away from what they owe, but at a price. To be fair to creditors, the law requires bankruptcy filers to surrender their assets to be sold and distributed as repayment to valid creditors. However, no Canadian will lose everything they own and in fact, many will lose nothing at all.
Provincial laws that establish exemption allowances for classes of personal assets supplement federal bankruptcy laws. Here in Alberta there is an exemption allowance of $40,000 for equity in a principal residence. What that means is if you own a home with less than the exemption allowance of 40k, you keep the home.
There are similar exemption allowances for clothing, furniture and appliances, cars, business equipment, and other personal possessions. The point is no one loses all they own in bankruptcy.
However, recognizing the fact that significant asset loss might be an undue hardship for some Canadians, the BIA was amended during the 1990’s to include an alternative that would allow debtors to keep all they own in exchange for repaying more of what they owe.
The alternative solution to bankruptcy is called a consumer proposal. As an example, if you owe $80,000 in unsecured debt and your total asset value is $30,000, a proposal gives you a way to protect the assets. Working with a licensed bankruptcy trustee, you might propose to your creditors you repay them half of what you owe over five years.
In essence, you would be paying out around $40,000 to protect $30,000 in assets, not including court costs and trustee commissions. For many residents of Edmonton, the positive advantages of a proposal outweigh the added costs when compared to bankruptcy.
Consumer proposals are good for creditors as well. In our example, they would get more money back through a proposal than they would through bankruptcy. To see if you qualify for a consumer proposal, schedule a free initial consultation with a licensed bankruptcy trustee.
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