Which assets are protected & which aren’t.
As with any debt relief solution, when you file for bankruptcy, there are some costs and fees you will need to pay. These are set by the federal government, not the Licensed Insolvency Trustee (LIT), and are required to provide some compensation for the money owed to your creditors. These fees also compensate the LIT for the service they provide you in filing and administering your bankruptcy. Costs can vary based on your income and situation, but you will likely be responsible for the following:
Surplus income payments require some individuals, depending on their income level, to repay a larger portion of their debts to their creditors. If you’ve filed for bankruptcy, you would provide your LIT with statements of your income and expenses every month. The LIT would then determine whether you need to make any surplus income payments, as required under federal bankruptcy law.
The federal government, through the Office of the Superintendent of Bankruptcy (OSB), has a minimum threshold that it considers as the amount of money needed “to maintain a reasonable standard of living” during the bankruptcy process. If you make at least $200 more than that threshold in any given month, you will have to pay half of the amount by which you exceed the threshold. For example, the OSB’s monthly threshold for a single person in 2016 is $2,089. If you made $2,500 in a given month, and do not share your household with anybody, you would have to make a surplus income payment of $205.50. The latest income thresholds, as well as some sample scenarios, can be found on the OSB website.
When you file for bankruptcy, some of your possessions will be protected by provincial exemptions, so you will not lose everything. However, you may have to give up certain assets in order for your LIT to repay your creditors a portion of the money owed to them. These could include your investments, quarterly GST credits, tax refunds for any year you haven’t yet filed, and the value of certain items, including your home or car, that are higher than the exemption in your province.
At BDO, we understand that filing for bankruptcy can be an emotional decision. If you are unable to manage your debt, a Licensed Insolvency Trustee can explain all your options to find the best solution for you. You might be able to avoid bankruptcy once all available solutions have been examined.
You may request a call to speak with a licensed debt help professional, and someone from your local BDO office will be in touch with you.