Bankruptcy Cost in Canada: How Much Does Bankruptcy Really Cost?

Short Answer: What Is the Cost of Bankruptcy in Canada?

Most first-time bankruptcies in Canada cost a few hundred dollars per month for 9–21 months, plus any non-exempt assets you may need to surrender or buy back. You do not pay separate “trustee fees” on top of these payments — the Licensed Insolvency Trustee (LIT) is paid from the funds you pay into your bankruptcy estate, according to federal rules.

The exact bankruptcy cost in Canada for you will depend on:

• Your income and whether you have surplus income according to government guidelines.
• Your household size.
• The value of any non-exempt assets.
• Whether this is your first or a repeat bankruptcy.

The Office of the Superintendent of Bankruptcy (OSB) sets and monitors the rules that govern bankruptcy costs and trustee compensation.

Quick Facts: Bankruptcy Cost in Canada

What Makes Up the Cost of Bankruptcy in Canada?

The total bankruptcy cost in Canada is made up of three main elements:

1. Basic monthly contributions to cover the administration of your file.
2. Surplus income payments if your income is above government guidelines.
3. Non-exempt assets that may be sold or “bought back” through payments.

All of these costs are administered by your Licensed Insolvency Trustee and governed by the Bankruptcy and Insolvency Act and the OSB. For more general information on insolvency costs and processes, see the Financial Consumer Agency of Canada – Insolvency page.

Basic Monthly Contributions

Most people in a first-time bankruptcy make a fixed monthly payment to their bankruptcy estate. This contribution helps cover:

• Administrative work done by your LIT and staff.
• Mandatory financial counselling sessions.
• Reporting to the OSB and your creditors.

These basic contributions are usually similar to, or lower than, what people are already struggling to pay on minimum payments. Your trustee will discuss what your contribution would be before you decide to file.

Surplus Income Payments

If your household income is above a certain level, the OSB’s surplus income guidelines require additional payments. This ensures that people with higher incomes contribute more to their creditors.

Surplus income rules consider:

• Your net family income.
• Your family size.
• Government thresholds published by the OSB.

If your income is consistently above the threshold, you may have to:

• Pay more each month (a portion of your surplus income).
• Remain in bankruptcy longer (e.g., 21 months instead of 9 months for a first-time bankruptcy).

Your monthly income and expenses are reported to your LIT, who calculates any surplus income payments that affect your bankruptcy cost in Canada.

Assets, Exemptions, and “Buying Back” Equity

Bankruptcy law in Canada allows you to keep certain exempt assets. Each province and territory has its own exemption rules, but common examples include:

• Basic household furniture and personal items.
• Tools of the trade up to a certain value.
• A modest vehicle up to a provincial limit.
• Most RRSP contributions older than 12 months.

If you have non-exempt equity (for example, significant equity in a home or an extra vehicle), your LIT must realize that value for your creditors. Often, rather than directly selling the asset, you can “buy back” the equity through additional monthly payments.

This equity buyback becomes part of the total cost of your bankruptcy. Your trustee will outline exactly how this works in your province.

First vs Second Bankruptcy Cost

The cost and duration of bankruptcy are higher for a second (or subsequent) bankruptcy compared to a first-time filing.

• First bankruptcy, no surplus income: Discharge is often after 9 months.
• First bankruptcy, with surplus income: Discharge may be extended to 21 months.
• Second bankruptcy: Discharge usually takes longer, and surplus income obligations may be more significant.

Because of the higher cost and longer time, your LIT will carefully review whether a consumer proposal might be a better, more predictable option the second time around.

Example Bankruptcy Cost Scenarios (Canada)

Every situation is unique, but these simplified examples illustrate how bankruptcy cost in Canada can vary.

Example 1: Lower Income, First Bankruptcy, No Non-Exempt Assets

• Single person with modest income below surplus guideline.
• No significant non-exempt assets.
• Makes basic monthly contribution (for example, a few hundred dollars) for 9 months.

Result: Total cost focuses on basic contributions. This is often the least expensive bankruptcy scenario.

Example 2: Higher Income, Family of Four, Surplus Income Applies

• Two-income household with net family income above surplus guideline for 4 people.
• Some surplus income payments required.
• Bankruptcy may last 21 months instead of 9.

Result: Monthly payments and overall cost are higher due to surplus income and longer duration.

Example 3: Homeowner with Equity

• Individual has equity in a home that is not fully exempt under provincial rules.
• Works with LIT to “buy back” equity via additional monthly payments instead of selling the home.

Result: The amount used to buy back equity becomes part of the bankruptcy cost, but the person may be able to keep the home.

These examples are simplified. A Licensed Insolvency Trustee can calculate a precise estimate based on your real numbers.

Comparing Bankruptcy Cost to Other Options

When you look at bankruptcy cost in Canada, it’s helpful to compare it to alternatives:

• Debt consolidation: You repay 100% of your debt plus interest over time. The “cost” is interest charges and loan fees. See Debt Consolidation in Canada.
• Credit counselling / DMP: You repay 100% of your debt through a Debt Management Plan, with reduced interest. Fees are typically modest admin charges.
• Consumer proposal: You repay only a portion of your debt with no interest. Monthly payments are often comparable to or lower than bankruptcy, especially if you have surplus income or assets. See Consumer Proposal in Canada.
• Bankruptcy: Involves basic contributions, possible surplus income, and any non-exempt equity. It may be the lowest monthly payment if your income is limited and assets are minimal.

Our Debt Relief in Canada guide compares these options side-by-side.

How to Estimate Your Own Bankruptcy Cost in Canada

To estimate your personal bankruptcy cost, you’ll need:

• Your monthly take-home income (and your spouse’s, if applicable).
• Your family size.
• A list of your assets and approximate values.
• Any special circumstances (self-employment, tax debt, support obligations, etc.).

Then:

1. Compare your income to the OSB surplus income guideline for your family size.
2. Identify any non-exempt assets that may add to the cost.
3. Estimate how long your bankruptcy would last (9, 21 months, or longer).

Because surplus income calculations and exemptions can be complex, the most accurate way to estimate your bankruptcy cost in Canada is to book a free consultation with a Licensed Insolvency Trustee.