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Ask a Licensed Insolvency Trustee! Sands & Associates answers frequently asked questions about legal debt solutions, including Consumer Proposals and bankruptcy.

Q: How much does it cost to file personal bankruptcy?

A: In Canada the cost of filing a personal bankruptcy is set by the Bankruptcy and Insolvency Act and the fees of the Licensed Insolvency Trustee are strictly regulated by Industry Canada.

For the majority of bankruptcies, the cost to the person filing bankruptcy will be a total of $1,800. Most people will pay this by making a monthly payment of $200 for the nine-month period of their personal bankruptcy.

The costs covered in this personal bankruptcy fee include:

  • The filing fee to register the bankruptcy in Canada;
  • Costs for two financial counselling sessions done as part of the bankruptcy;
  • Preparation and filing related income tax returns.

Many people mistakenly believe that the cost of bankruptcy is related to the amount of debt you have – this is false. Regardless of the total amount of debt that you are writing off in the bankruptcy, the tariff-based Trustee’s fees are the same whether you owe $10,000 or $100,000.

A person’s monthly, after-tax income is the major factor that impacts both the amount of money a person pays into their bankruptcy, as well as the length of the bankruptcy.

While most people filing a personal bankruptcy will fall under the above-described scenario of paying $200 per month for 9 months; if a person’s income is above the government-set ‘superintendent’s standards’, instead of paying the bankruptcy fees, they will instead pay what is called ‘surplus income’. In the event that surplus income is payable, the bankruptcy period will be 21 months (in a first-time bankruptcy).

Example:

A single person has net (take-home) pay of $2,500 per month.
The monthly superintendent’s standard for a one-person household (for 2018) is $2,152.

$2,500 – $2,152 = $348
$348 x 50%* = $174

Monthly bankruptcy payment (surplus income) is $174 total, for 21 months.

*Only 50% of surplus income needs to be paid.

There are many variables when it comes to surplus income and people commonly have expenses (i.e. child care, medical costs) which can reduce how much surplus income they need to pay. A Licensed Insolvency Trustee will review your specific situation and estimate any surplus income obligations with you, before you make any commitment. If surplus income is likely, you may wish to consider filing a Consumer Proposal as an alternative to filing a personal bankruptcy.

No referral is needed to meet with a Licensed Insolvency Trustee about debt solutions. Confidential consultations to discuss your situation are always free.

Bankruptcy may not be your only solution – meet with a debt expert at Sands & Associates to learn more about your debt options, including filing a Consumer Proposal. Book your confidential free consultation today!