What Does it Cost to File for Bankruptcy in Ontario?

Filing for Bankruptcy in Ontario: A Comprehensive Guide to Costs

Bankruptcy is a legal process that provides relief to individuals struggling with debt. However, it comes with its own set of costs. If you’re considering filing for bankruptcy in Ontario, it’s essential to understand these expenses. This article explores the Cost to File for Bankruptcy in Ontario and what you can expect during the process.

Understanding the Basics

Bankruptcy is not a free process. It involves certain costs, which are generally divided into two categories— the Base Rate Financial Contribution and the Surplus Income Contribution. These costs depend on various factors, including your monthly income, the size of your family, and whether or not it’s your first or second bankruptcy filing.

Base Rate Financial Contribution

The base rate financial contribution is the minimum amount that everyone filing for bankruptcy has to pay. This amount, which is approximately $1,800, is paid over a period of nine months. It might seem like a hefty sum initially, but keep in mind that all other bills and payments will cease during this period.

Surplus Income Contribution

In addition to the base rate, some individuals might have to make “Surplus Payments”. If your income exceeds the limit set by the government, you’ll be required to pay 50% of the surplus amount into the bankruptcy. This contribution is based on your whole family’s income, after taxes and allowable expenses.

Factors Affecting the Cost of Bankruptcy

The cost of filing for bankruptcy in Ontario can vary based on several factors:

  1. Average Monthly Income: Your monthly income plays a significant role in determining the cost of bankruptcy. If your earnings exceed a certain limit, you’ll have to make surplus payments.
  2. Value of Non-exempt Assets: If you own any non-exempt assets, their value can also affect the cost. Non-exempt assets are those that aren’t protected under bankruptcy laws and can be sold to repay your debts.
  3. Family Size: The size of your family is another important factor. The government sets income limits based on family size, which affects the amount of surplus income you might have to pay.
  4. Type of Expenses: Certain expenses can be deducted from your income before calculating the surplus income. These include child care and child support.
  5. Number of Bankruptcies: If you’ve filed for bankruptcy before, the cost might be higher.

Calculating Surplus Income

The concept of surplus income might seem complex, but it’s crucial to understand it when calculating the Cost to File for Bankruptcy in Ontario. The government sets income thresholds based on family size. Any income exceeding these limits is considered surplus income.

Here’s a breakdown of the income limits for different family sizes:

  • 1 person: $2,152 per month or $25,824 per year
  • 2 persons: $2,679 per month or $32,148 per year
  • 3 persons: $3,293 per month or $39,516 per year
  • 4 persons: $3,998 per month or $47,976 per year
  • 5 persons: $4,535 per month or $54,420 per year
  • 6 persons: $5,114 per month or $61,368 per year
  • 7 persons: $5,694 per month or $68,328 per year

Certain expenses, like child support, medical costs, and child care, are deducted from the income before calculating the surplus amount.

Additional Costs of Bankruptcy

Apart from the base rate and surplus income contributions, you might have to bear some additional costs during your bankruptcy:

  • Non-exempt Assets: You might lose your non-exempt assets as they could be sold to repay your debts. However, some assets are protected under Ontario’s bankruptcy laws.
  • Tax Refunds and HST Credits: You could lose any tax refunds and HST credits you would otherwise receive during the bankruptcy period.
  • Windfalls: Any windfalls, like lottery winnings or inheritances, must be surrendered to the trustee during the bankruptcy period.

Seeking Professional Advice

Given the complexity of the bankruptcy process, it’s advisable to seek professional advice. A licensed insolvency trustee can provide you with detailed information about the Cost to File for Bankruptcy in Ontario and help you navigate the process.

In conclusion, while bankruptcy can provide financial relief, it’s crucial to understand the associated costs. By being aware of these costs, you can make an informed decision and manage your finances more effectively during this challenging time.

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