It costs money to file for bankruptcy in Canada, but the amount depends on your income and assets.
As everyone’s circumstances are different, you must first consult a trustee who will work out the cost of your bankruptcy.
But don’t worry: your Licensed Insolvency Trustee can arrange a payment plan that is affordable based on your income.
A breakdown of bankruptcy costs in Canada
First of all, you must establish whether bankruptcy is the best route to deal with your debts.
When you talk to a trustee, the consultation is free.
Surplus income payments in bankruptcy
When you file for bankruptcy in Canada, your income determines how much you pay each month.
Income thresholds are set by the Office of the Superintendent of Bankruptcy to ensure you and your family have enough money to maintain a reasonable and fair standard of living during your bankruptcy.
When you file, your Licensed Insolvency Trustee will require you to disclose your income, expenses, assets and debts.
After considering your income, expenses, and assets, you will be liable for surplus income payments if you earn more than the income threshold.
If this applies to you, you must pay half this amount to your trustee, which will be distributed to your creditors.
In short, if your income goes up, your payments increase, along with the time it takes to be discharged. You’ll be required to submit proof of your income each month to ensure that you are not exceeding this threshold.
How surplus income affects the length of bankruptcy:
- If this is your first bankruptcy and you have no surplus income, your bankruptcy will last 9 months.
- If this is your first bankruptcy and you have surplus income, your bankruptcy will last 21 months.
- If this is your second bankruptcy and you have no surplus income, your bankruptcy will last 24 months.
- If this is your second bankruptcy and you have surplus income, your bankruptcy will last 36 months.
- A third bankruptcy requires a discharge hearing in bankruptcy court. The court will decide if you should be discharged and when.
See also: Surplus income in bankruptcy
Administrative fees in bankruptcy
If you decide to proceed and file for bankruptcy, there may be administrative fees to cover the work of the Licensed Insolvency Trustee.
This fee is paid over the bankruptcy period, and the cost depends on your individual circumstances and whether you have any assets or surplus income.
If you have no surplus income, you’ll typically need to make a payment to cover these administrative fees unless you have assets that can be sold to cover the cost.
If you have surplus income, the trustee will likely collect any administrative fees through your surplus income payments at no extra cost to you.
Speak to a Licensed Insolvency Trustee today to find out more.
When you declare bankruptcy, you must surrender any assets that are non-exempt to your Licensed Insolvency Trustee.
Your Licensed Insolvency Trustee will turn those assets into cash to be distributed to your creditors. In some cases, a trustee can collect part of their fees from the sale of an asset.
A non-exempt asset could be equity in your home, an expensive car, RRSP contributions made in the last year, a tax refund or certain savings and investments. But it all depends on your situation and where you live in Canada.
Items like clothing, healthcare, food and heating, household furnishings and work tools are usually protected.
Repurchasing non-exempt assets in bankruptcy
If you have a non-exempt asset but want to keep it, you can pay the value of your asset to your trustee to repurchase it.
However, in this instance, a consumer proposal might be a better option. This is a debt settlement plan where you keep your assets.
Inheritance or windfall
If you receive an inheritance or windfall, your Licensed Insolvency Trustee must take the money and distribute the proceeds to your creditors. Anything leftover is returned to you.
A consumer proposal can protect your income and assets
Your income and assets are by far the most significant considerations when researching bankruptcy.
Remember, if you have a high income or assets that you want to protect, you should explore other options, particularly a consumer proposal.
A consumer proposal allows you to pay a fixed amount and keep your assets.
Your credit score after bankruptcy
If you choose bankruptcy, your credit score will suffer, which will make it hard to borrow money.
If this is your first time declaring bankruptcy, it will appear on your credit report for at least six years after completion. Subsequent bankruptcies remain on your credit report for fourteen years from the date of completion.
Many lenders offer credit-building products such as secured credit cards, which can help improve your credit score. This is something to consider after your bankruptcy is complete.
How much will bankruptcy cost for me?
Bankruptcy costs vary for everyone, so to get a cost estimate for bankruptcy, contact a Licensed Insolvency Trustee and schedule an assessment. This assessment allows the trustee to review your situation and determine if filing bankruptcy is right for you.
During this assessment, answer the questions honestly and thoroughly and provide all the requested information. Your trustee will review your circumstances and determine if bankruptcy is the best option for you.
If you qualify, review the pros and cons of bankruptcy or the solution recommended by your trustee and decide based on the impartial advice provided.
If bankruptcy is suitable for you, the trustee will thoroughly explain the process and guide you every step of the way.
Bankruptcy costs depend on your income, expenses and assets.
If you earn more than the income threshold set by the Office of the Superintendent of Bankruptcy, you will be liable for surplus income payments, which you can pay over the term of your bankruptcy.
If you have surplus income, your bankruptcy will take longer.
Administrative fees are paid through your bankruptcy to cover the work carried out by your Licensed Insolvency Trustee.
Your Licensed Insolvency Trustee can seize some assets, but you can keep them by paying the asset’s value to your trustee.
If you have a high income or significant assets to protect, you might also want to consider a consumer proposal.
Only a Licensed Insolvency Trustee can give you an exact cost after reviewing your situation.
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