Do You Have to Pay to Go Bankrupt?

Paying to Go Bankrupt When I Can’t Pay My Bills: A Comprehensive Guide

Bankruptcy can be a viable path to financial stability for many people struggling with unmanageable debts. However, it’s not a free process. This guide will explore the question, “Do you have to pay to go bankrupt?” and discuss the associated costs, factors influencing these costs, and potential alternatives to bankruptcy.

Understanding Bankruptcy

Bankruptcy is a legal process that helps individuals or businesses eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. Essentially, it allows for a fresh financial start, albeit with some significant consequences.

The Cost of Bankruptcy: An Overview

Contrary to what some might think, declaring bankruptcy isn’t free of charge. It entails administrative costs owed to the government and fees for a Licensed Insolvency Trustee (LIT), an individual or corporation licensed by the Superintendent of Bankruptcy to administer bankruptcy and proposal estates.

Factors Influencing Bankruptcy Costs

The cost to file bankruptcy in Canada isn’t a fixed sum. It varies based on specific individual circumstances. The following are the main factors determining these costs:

Monthly Contributions

The base cost for filing bankruptcy for the first time in Canada is generally around $1,800, which can be paid in monthly installments over nine months. These payments cover administrative expenses such as government fees, LIT’s time, and mailing costs.

Surplus Income Payments

The government sets a standard of living threshold, and if your income exceeds this limit, you’ll need to make surplus income payments. Essentially, the higher your income, the more you’ll need to pay. This notion is the underlying principle of surplus income in bankruptcy.


When filing for bankruptcy, you’re required to surrender non-exempt assets to your LIT. These assets are then used to repay your creditors. However, you won’t lose everything as some assets are considered exempt from bankruptcy.

Licensed Insolvency Trustee Fees

LITs are professionals who undergo extensive training to help individuals navigate complex debt situations. They offer services like providing information about debt relief options, negotiating with creditors, assisting with budgeting, and ensuring all procedures comply with the Bankruptcy and Insolvency Act. Fees for their services are included in your monthly bankruptcy payments.

Alternatives to Bankruptcy

While bankruptcy can provide relief for many, it’s not always the best option for everyone. There are several alternatives to consider, such as a consumer proposal or a debt consolidation loan. These options can often lead to a more affordable way of reducing your debts while keeping your assets.

Final Thoughts

Deciding to file for bankruptcy is a significant decision that can greatly impact your financial future. It’s important to understand the costs involved and explore all alternatives before proceeding. If you’re considering bankruptcy, consulting with an experienced LIT can help you make an informed decision.

Remember, the question is not just, “Do you have to pay to go bankrupt?” but also, “What are the long-term financial implications?” and “Are there better alternatives for my specific situation?”.

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