What Does it Cost to Go Bankrupt in Ontario?
If you are struggling with debt in Ontario and have decided to explore bankruptcy as a potential solution, then it’s important that you understand at what cost this may come to you.
There is no set figure for the cost of bankruptcy in Ontario, and how much you will need to pay will depend on a couple of different factors.
Although this article will not be able to give you an exact estimation for the cost of your bankruptcy, we hope that it will help to clarify some of the costs involved in the bankruptcy process.
For a precise estimate for the cost of your bankruptcy in Ontario, please contact us for a free conversation with one of our licensed trustees, who will be able to more accurately assess your unique financial situation.
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What factors contribute to the cost of bankruptcy?
When you choose to file for bankruptcy in Canada, there are several things that contribute to the overall costs.
- The cost of administration fees (the fee of your licenced trustee etc).
- How much you earn and whether you need to pay a surplus income fee.
- And the value of the assets that you own.
In general, the cost of your bankruptcy will be determined by how much you earn and how much you own, which together will be used to determine how much you must pay to your creditors.
This will then be combined with an administration fee.
Bankruptcy is a legal process and as such involves a lot of administration.
In Canada, the minimum cost to file for bankruptcy is $1,800 which is payable in 9 more affordable monthly instalments of $200, but this can increase depending on the assets realized as a part of your estate.
This administration contribution helps to cover the fee of your bankruptcy trustee as well as other administrative services such as postage.
The fees that a trustee can charge are fixed by the federal government and so you do not need to worry about paying more or less depending on the trustee you choose.
You really don’t even need to worry about paying your administration fees at all, as they will be taken from the value of your realized assets before they are then distributed to your creditors.
Should your monthly payments only be $200, then this $200 would be taken to cover your minimum administration fee and your creditors would get nothing – essentially your creditors pay for your bankruptcy administration fees.
You can read more about the government’s tariff for administration fees here.
Based on your income
Although you must be insolvent to declare bankruptcy in Canada, this doesn’t mean that you are unable to earn an income.
Many people who declare bankruptcy still work a regular job and still take home a good monthly income.
The bankruptcy process is designed to help you to start a new financial slate, and so it is not in the best interests of the government to take too much of your income unless it is beyond that of your basic needs.
The amount of your income that you will get to keep for living expenses will depend on the size of your family, with larger families getting to keep more of their income to cover their higher living costs.
If you earn over the income threshold for the size of your family, then this is deemed a surplus income, and you will need to pay a surplus income fee to your creditors.
The surplus income fee that you need to pay will be half of the amount that you earn above the income threshold, for example, if you earn $300 above your income threshold, then you will need to pay $150 to your creditors.
Surplus income charges
Throughout the bankruptcy process, you will be required to send your bankruptcy trustee a copy of all of your pay stubs and expenses.
This is so that they can work out your net income and whether you need to pay a surplus income charge to your creditors.
In the event that you do need to pay a surplus income charge, then half of the amount that you have earnt over the threshold will need to be paid to your creditors.
What’s more, earning a surplus income can also extend the duration of your bankruptcy, taking it from a minimum term of 9 months, and extending it by 12 months, so that you end up paying more to your creditors.
If you earn a substantial income, then it may be worth considering a consumer proposal as an alternative to bankruptcy.
Based on your assets
It’s a common misconception that during bankruptcy you will lose everything that you own, but just like your income, it is not in the best interest of the government to take away all of your assets, and so there are rules in place to determine what you will lose and what you will be able to keep.
The rules about which assets you will need to give to your creditors and which you can hold onto do vary from province to province, in Ontario, generally, you are able to keep the following:
- One vehicle depending on its value (There is a $6,600 exemption limit).
- Most of your personal possessions and home furnishings.
- Most of your pensions and savings.
- Any tools that you need for work.
Although there are value limits to these assets, for most people, the limits are high enough that they are nothing to worry about. Of course, there are certain assets that you will need to hand over to your creditors, these include:
- Any equity in your home greater than $10,000.
- Investments such as Canada Savings Bonds.
- RRSP contributions that you have made in the last year.
- Any tax refunds that you are entitled to (this includes tax refunds for past years up until the year that you declare bankruptcy.)
- And any of the aforementioned exempt-assets that exceed the threshold value.
Alternatives to bankruptcy in Ontario
If you have a lot of assets or still earn a significant income, then a consumer proposal may be a more cost-effective way to settle your debts.
A consumer proposal allows you to keep all of your assets and to settle your debts with affordable monthly repayments over a set period of up to five years.
After the agreed period has expired, any of your remaining debts are erased and you can begin your new financial slate.
How a consumer proposal works
Wherever possible, your licenced insolvency trustee will discuss alternatives to bankruptcy, helping you to keep more of your assets and also ensuring that more of what you owe is paid to your creditors.
Believe it or not, creditors do not want you to file for bankruptcy, as they will usually only receive a small proportion of what they are owed.
Once the consumer proposal process has been started you will not be charged any further interest on your debts, your creditors will not be allowed to harass you for payments, and your licenced trustee will converse with your creditors on your behalf.
During a consumer proposal, your licenced trustee will assess your income and your debts to determine how much you can afford to repay your creditors.
This proposal is then sent to your creditors for their agreement.
The vast majority of consumer proposals are accepted by creditors as they provide a better alternative to bankruptcy.
You will then be required to make your agreed monthly repayments for the agreed period of time up to a maximum term of five years.
You won’t need to hand over any of your assets and after your agreed term is up, you will be debt-free.
Finding out the cost of bankruptcy to you
Each bankruptcy is different and so it is always best to assess them on a case by case basis rather than trying to give a broad estimate.
Here at Bankruptcy Canada, we are experts on bankruptcy and are committed to helping you start a new life debt-free.
If you are concerned about the cost of bankruptcy, then contact us for a free, no-obligation conversation with one of our licensed insolvency trustees who will be able to assess your unique financial situation and to give you a more accurate estimation of your bankruptcy costs.
Although we are experts on bankruptcy, our licensed insolvency trustees will never push you towards a bankruptcy decision and will be able to help you file a consumer proposal if this option is better suited to your situation.
We understand that taking the first step in overcoming your debts is often the most daunting, but we want to reassure you that we are here to help.
For confidential information on our debt-relief services, please contact us on (877) 879-4770 or by filling out our quick online form.
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