Bankruptcy Filing Costs in Canada
What is the Bankruptcy Cost
Our bankruptcy calculator will give you the exact cost and the length of time you will be in bankruptcy.
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Components of Bankruptcy Cost
There are three main components that contribute to the overall cost of filing bankruptcy in Ontario or any other province in Canada:
Monthly Contributions for Administration Costs: When filing for bankruptcy, individuals are required to make monthly contributions to cover the cost of administration. These contributions are used to cover government fees, the bankruptcy trustee’s time, mailing, and other administrative expenses. The amount of the monthly contribution varies based on the individual’s financial situation.
Surplus Income Payments: The government has established rules regarding surplus income payments in bankruptcy. The concept is simple: the more you earn, the more you are expected to contribute to your creditors. The government allows individuals to keep a portion of their income for living expenses, and any income above this threshold is subject to a surplus income payment. The surplus income payment is calculated as 50% of the amount earned above the threshold.
Assets You Keep or Lose: In a bankruptcy, individuals may have to surrender certain assets to the bankruptcy trustee. However, not all assets are lost in bankruptcy. The government has set rules regarding what assets can be kept and what assets must be surrendered. These rules vary by province, but in Ontario, individuals can typically keep most personal possessions and household furnishings, tools needed for work, one motor vehicle (up to a certain value), and most pension and RRSP savings (except recent contributions). However, assets such as equity in a home, investments, RRSP contributions made in the last year, and tax refunds may be subject to seizure by the trustee.
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Cost Based on Income
The cost of bankruptcy is often determined by an individual’s income. The government recognizes that individuals need income to cover their living expenses, so they allow for certain exemptions based on family size. The larger the family, the more income the individual is allowed to keep. However, any income earned above this threshold is considered surplus income and is subject to payment to the creditors. The surplus income payment is calculated as 50% of the surplus income amount.
It is important to note that the surplus income amount also affects the duration of the bankruptcy. A first bankruptcy typically lasts for a minimum of nine months. However, if an individual’s surplus income payments average more than $100 per month, the bankruptcy may be extended for an additional 12 months. This extension is meant to ensure that individuals with higher incomes contribute a fair amount to their creditors.
Cost Based on Assets
In addition to income, the cost of bankruptcy is also influenced by the assets an individual owns. While bankruptcy requires surrendering certain assets, not all assets are lost. The government has set rules on what assets can be kept, and these rules vary by province. In Ontario, individuals can generally keep most personal possessions and household furnishings, tools needed for work, and one motor vehicle (up to a certain value). However, assets such as equity in a home, investments, recent RRSP contributions, and tax refunds may be subject to seizure by the trustee.
If an individual has a significant amount of assets or a high income, they may consider exploring alternatives to bankruptcy, such as a consumer proposal. A consumer proposal allows individuals to negotiate a plan to settle their debts while retaining their assets.
Bankruptcy Trustee Fees
Bankruptcy trustee fees are regulated by the federal government and are included in the overall cost of bankruptcy. The fees are based on a government tariff and are calculated as a percentage of the realizations in the bankrupt’s estate. The fees are paid before distribution is made to the creditors, so it is the creditors who ultimately bear the cost of the trustee’s fees.
It is important to note that individuals are not required to pay an extra fee to the trustee. The trustee’s fee is deducted from the monthly contributions made by the individual. For example, if an individual is required to pay $200 per month based on their income, that amount already includes the trustee’s fee.
Estimating the Cost of Bankruptcy
Given the complexity of the factors involved in determining the cost of bankruptcy, it is crucial to consult with a licensed bankruptcy trustee to get an accurate estimate. At Hoyes, Michalos & Associates, we offer a free initial consultation where our expert trustees can review your situation and provide you with an estimate of the cost based on your individual circumstances. Our team will guide you through the various debt management options available in Ontario and help you determine if bankruptcy is the right solution for you.
How Your Circumstances Impact the Costs
If you have income that is over the limit set by legislature you will be required to pay surplus income payments which is impacted by your family size and your income.
As you can see, the cost to declare bankruptcy will vary depending on your individual situation.
The overall costs of going bankrupt can end up being quite high in some cases.
If you receive a “windfall” during your bankruptcy you will be required to turn over these monies to your trustee as well.
“Windfalls” are money or assets you receive through luck such as lottery winnings or money you inherit.
The Office of the Superintendent of Bankruptcy regulates the fees a trustee can charge, so you don’t have to shop for a trustee based on price.
How Can I File Bankruptcy if I Can’t Afford the Fees?
If you cannot afford the cost you might be what is known as “judgement proof”.
Judgement proof refers to the fact that if you are sued you have no assets that the creditor can seize.
Please refer to your province or territory’s bankruptcy exemptions which also apply to non-bankrupts.
Depending on your situation, you might be able to avoid insolvency altogether and still become debt free in time.
Discuss options to get out of debt with a trained & licensed debt relief professional.
Bankruptcy comes at a cost, but the specific amount varies for each individual based on factors such as income, assets, and family size. The cost is determined by monthly contributions for administration, surplus income payments, and the surrendering of certain assets. By consulting with a licensed insolvency trustee, individuals can get a clear understanding of the cost of bankruptcy and explore alternative debt management options if necessary. At Bankruptcy Canada, we are committed to helping individuals successfully resolve their overwhelming debts. Contact us for a free, no-obligation consultation to learn more about the cost of filing bankruptcy in Canada.