What does it cost to file for bankruptcy?

What is included in the costs to declare bankruptcy? 

First, it’s important to mention that everyone’s situation is unique. So, the exact amount that you will pay to file for bankruptcy will depend on your circumstances. Your monthly income and assets, ongoing expenses, living costs, and family size will all have an impact. A Licensed Insolvency Trustee (LIT) will help you determine what you will need to pay to declare bankruptcy.

Overall, bankruptcy costs include: 

• the administrative costs for the bankruptcy process;  
• any assets that you must surrender under bankruptcy law to help repay your creditors;
• surplus income payments that are required under bankruptcy law.

What’s included in the administrative costs when filing for bankruptcy? 

Administrative fees for filing bankruptcy include government fees, your LIT’s administrative expenses and payment for your LIT’s time. If you are declaring bankruptcy for the first time, the basic cost to file in Canada is $1,800. This cost is determined by the Office of the Superintendent of Bankruptcy Canada (OSB) and can be broken down into nine monthly payments of $200.    

How will you know if you owe surplus income?  

The income that is required to maintain a reasonable standard of living for your family during the period of your bankruptcy is determined by the Office of the Superintendent of Bankruptcy Canada (OSB). Surplus income is the amount of income you make that exceeds these OSB guidelines. If your income exceeds the OSB guidelines by $200 or more, you’ll be required to pay 50 per cent of that surplus to your LIT to reimburse your creditors.  

For example, if your income is $500 higher than the OSB guidelines for your family size, you would be required to pay half, or $250, towards your debts each month. One of your obligations when you file for bankruptcy is to report your monthly income and expenses to your LIT so they can determine your net income and calculate if you have surplus income. 

What assets can you keep?  

When you file for bankruptcy, you will have to surrender some of your assets to help repay your creditors. Your LIT will review your situation with you and help you understand what you can keep and what you must give up. Each province has its own list of bankruptcy exemptions (assets that you can keep). The purpose of these exemptions is to allow people to maintain a reasonable standard of living during the bankruptcy process.  

Additional assets you will have to give up when you file for bankruptcy include: 

• your tax refund for the year that you declare bankruptcy and tax refunds you haven’t received from the years before filing for bankruptcy;  
• RRSP contributions you made in the 12 months preceding your bankruptcy filing, except in Alberta; 
• GST refunds during the term of your bankruptcy.  

Whether you lose or keep your home when you declare bankruptcy will depend on several factors, including the amount of equity you have in your home, and whether you’re able to continue making your mortgage payments during the bankruptcy process.  

An LIT will help you determine your bankruptcy cost 

While the idea of declaring bankruptcy may at first seem overwhelming and complex, it’s not as scary as you may think. All bankruptcy rules and regulations are in place to ensure that all individuals who file for bankruptcy are treated fairly. Your LIT is your most important resource. He or she will guide you through each step of the bankruptcy process. 

Debt is stressful. Talking to a professional as soon as possible means you’ll have all your options laid out for you. If bankruptcy is the best solution for you, your LIT can get the process started for you immediately. If another option, like a consumer proposal, is a better fit, you’ll learn that, too. The sooner you start the process the sooner you’ll be free from unmanageable debt and ready to start the next chapter of your life. 

Wondering what the costs of bankruptcy would be in your situation? Meet with a Licensed Insolvency Trustee for a free consultation today.  

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