When it comes to debt, sometimes you need a fresh start.

If you cannot afford to repay your debts and there is no other way out, bankruptcy can help you clear your debts and start over.

This guide examines who pays for bankruptcies and the costs involved.

Who pays for bankruptcies?

So who is responsible for paying for bankruptcy? Is it taxpayers, the government or someone else?

Bankruptcy is paid for by the person filing for bankruptcy. It’s as simple as that.

The cost of bankruptcy in Canada is different for everyone and is calculated by examining your income, expenses, assets and debts.

Next, let’s break down the costs of personal bankruptcy.

What is the cost of bankruptcy?

In Canada, only Licensed Insolvency Trustees (sometimes called bankruptcy trustees) can file personal bankruptcy on your behalf.

There is no upfront cost to book a consultation with a trustee. Once you have discussed your financial situation, your trustee will recommend a way forward.

If you decide to proceed with bankruptcy, there are costs to file and fees to cover the work of the Licensed Insolvency Trustee.

Base contribution cost

Bankruptcy base contribution costs cover filing fees, administrative costs, and a Licensed Insolvency Trustee’s time working on your bankruptcy.

If it’s your first time filing for bankruptcy, the minimum cost is at least $1,800, spread over nine payments of $200 per month. Paying in monthly installments makes it easier to afford.

However, these costs can be higher under some circumstances.

Surplus income cost

You are required to make bankruptcy payments based on your income.

You pay surplus income if you earn more than the income thresholds set by the Office of the Superintendent of Bankruptcy. If you exceed the threshold by more than $200, you must pay half of the amount over the threshold.

Surplus income payments affect how much your bankruptcy costs and how long you are bankrupt.

During the bankruptcy process, you must send your trustee proof of your income and expenses each month so they can calculate how much you need to pay.

Asset cost

Some assets can be seized by your Licensed Insolvency Trustee when you file for bankruptcy. Non-exempt assets can be sold by your trustee, with the proceeds used to pay your creditors.

You can make a payment arrangement with your Licensed Insolvency Trustee to repurchase any non-exempt assets you wish to keep.

Discuss the best way to resolve debts and protect assets with a Licensed Insolvency Trustee.

Your trustee may recommend a consumer proposal, which lets you keep all of your assets.

Personal cost

It’s not only monetary reasons that you have to think about when considering bankruptcy.

While a first-time bankruptcy takes a minimum of nine months, it takes longer if you have surplus income. You must also carry out some duties during the process.

Lastly, bankruptcy damages your credit score, making it difficult to get credit. But once you’ve paid off your debts, you can start to improve your credit score at a faster rate.

The bottom line is you pay for bankruptcy

In Canada, the person declaring bankruptcy pays for bankruptcy. The cost depends on your income, expenses and assets, but there is a minimum cost of $1800.

You will be liable for surplus income payments if you earn more than the income threshold set by the Office of the Superintendent of Bankruptcy.

A Licensed Insolvency Trustee can give you an exact cost for bankruptcy after reviewing your financial situation.

Find out if bankruptcy is right for you

Bankruptcy can help people struggling with debt they cannot afford to repay. This process can allow them to clear their debts and start over.

In as little as nine months, you can eliminate most of your unsecured debts by declaring bankruptcy.

You can file for bankruptcy without approval from your creditors. On completion, you’ll be released from your debts and can start rebuilding your credit.

We work with Licensed Insolvency Trustees throughout Canada. For free debt assistance, contact a local office below.

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