Will I lose my home if I file for Bankruptcy in Alberta?

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When your debt starts to feel out of control, and you’re struggling to pay your bills, you might think about filing for bankruptcy. While the thought might be scary or embarrassing, for some Albertans, bankruptcy is the right answer.

The goal of bankruptcy isn’t to punish, it’s to provide a second chance for a fresh start. Still, many people delay reaching out for help because they’re afraid getting out from under their debt could mean losing their home. The good news? Filing for bankruptcy doesn’t automatically mean you have to give up your home, and it’s not the only option available.

Bankruptcy exemptions in Alberta

Filing for bankruptcy doesn’t mean you’ll automatically lose your home.

It is true that once you declare bankruptcy, some of your assets may be sold to repay your creditors. But each province has a list of exempt assets that can’t legally be sold.

When it comes to your home, Alberta has one of the most generous home equity exemptions in Canada at $40,000. This is more than three times Ontario’s limit.

Home equity is the difference between current market value and the unpaid balance of your mortgage.

For example, say your home is valued at $500,000, and you still owe $475,000 on your mortgage. Your home equity is $25,000 ($500,000 – $475,000).

If your home equity is more than $40,000, this still doesn’t guarantee you’ll lose your home. The decision depends on your specific circumstances. Your Licensed Insolvency Trustee (LIT) can explain what will happen in your situation.

Alternatives to bankruptcy in Alberta

Depending on your financial situation, you may have other debt relief options, which generally don’t require that you give up your assets.

OPD program

With the Orderly Payment of Debts (OPD) program, Albertans can consolidate their unsecured debts into one monthly payment. The program is only available in Alberta through Money Mentors. If you qualify for the OPD program, you have up to five years to repay your debt at a 5% fixed interest rate.

Unlike bankruptcy, the OPD program allows you to keep all of your assets. While bankruptcy can sit on your credit report for six years and your permanent insolvency record forever, the OPD only stays on for two years after completing the program.

Just like bankruptcy, the OPD program protects you from creditor actions, including collection calls and wage garnishment.

Consumer proposal

In a Consumer Proposal, you work with a Licensed Insolvency Trustee to create an offer to repay your creditors a percentage of your debt, extend the time you have to pay, or both. If they accept, you’re responsible for making payments to your LIT. You have up to five years to complete it. Once you’re done, you’re legally free from the debts included in your proposal but it will stay on your permanent insolvency record forever.

The biggest difference between a consumer proposal and bankruptcy is that you get to keep your assets, including your home, as long as you keep up with your payments. Unlike bankruptcy, which eliminates all eligible debts, in a consumer proposal you still pay a portion of your unsecured debt.

Similar to bankruptcy, when you file a consumer proposal, you receive protection from creditor actions, such as lawsuits, collection calls, and wage garnishment.

Learn about your options

If you’re at a point where your debt is making you question bankruptcy and you’re worried about losing your home, it’s time to ask for help.

You can speak with one of our Certified Financial Counsellors to learn about the debt relief options available to you. We can assess your financial situation and help you find a path forward. The earlier you reach out, the more options you’ll have available.

When you’re ready, give us a call at 1-888-294-0076 or complete our online contact form for a free, no-judgement conversation about your finances. We’re here to provide unbiased information, answer your questions, and help you achieve your money goals.

Bankruptcy and home ownership in Alberta: FAQ

Will I automatically lose my house if I declare bankruptcy?

No. Declaring bankruptcy doesn’t mean you’ll automatically lose your home. What happens largely depends on how much equity you have in your home. In Alberta, up to $40,000 of home equity is protected from seizure.

Will filing for bankruptcy erase my mortgage?

No. Filing for bankruptcy will not erase your mortgage. Your mortgage is a secured debt, and bankruptcy does not eliminate secured debts.

Can I keep my house if I file a consumer proposal?

Yes. This is one of the biggest reasons Albertans choose a consumer proposal over bankruptcy. You get to keep your assets as long as you stay current on your payments to your secured creditors.

What is the OPD program in Alberta?

The Orderly Payments of Debts (OPD) program helps Albertans combine their unsecured debts into one monthly payment with a 5% interest rate. You still pay back 100% of what you owe, but with a low, predictable rate and protection from creditor actions like collection calls and wage garnishment.