When finances are strained and managing debts has been a challenge for some time, it’s no surprise that one of the first questions people considering personal bankruptcy ask is “How much does a bankruptcy cost?”. Whether you need help managing debts of $10,000 or $100,000, read on to learn how much it costs to declare personal bankruptcy in BC.
Working with a Licensed Insolvency Trustee
Declaring personal bankruptcy in Canada is done with the help of a Licensed Insolvency Trustee – you do not need to hire a lawyer or consultant. The entire process and cost of filing a personal bankruptcy including the Trustee’s fees and Government filing fees are set by the Bankruptcy and Insolvency Act – these tariff-based fees are strictly regulated and monitored by the Federal Government.
Free Debt Consultation
Before officially beginning a bankruptcy, you will need to connect with a Licensed Insolvency Trustee like Sands & Associates for a confidential debt consultation. No referral is needed – simply book your free debt consultation directly.
- A Licensed Insolvency Trustee or qualified Insolvency Estate Manager will meet with you confidentially and for free to discuss your specific situation, your goals, and to help you understand all of your legal debt options, in addition to and including bankruptcy.
- It should never cost you money to find out what solutions are available to you.
- This first debt consultation meeting is very important; some components of how bankruptcy, debt consolidation and Consumer Proposal processes work will vary depending on your unique circumstances. It is crucial that you get accurate information so you can make the best decision on how to move forward.
Bankruptcy may not be your only solution – many people are able to pay off an affordable portion of their consolidated debts and have the unmanageable balances and interest forgiven by making a Consumer Proposal instead. Click here to learn more about Consumer Proposals.
Cost of Bankruptcy Proceeding
There is a cost to declare bankruptcy and work through the process, however, unlike professionals such as accountants and lawyers, Licensed Insolvency Trustees do not set their own rates and fees; there is no “invoice for services rendered”. 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.
Since most people keep all their assets in a bankruptcy, the bankruptcy costs will instead be paid directly by the person who wants to declare bankruptcy:
- In most bankruptcies the direct cost to the person filing bankruptcy is $1,800. Usually the Licensed Insolvency Trustee will work out a payment plan where you will pay this by way of monthly payments of $200 for the nine-month period of bankruptcy.
The costs covered in this personal bankruptcy fee include:
- The filing fee to register the bankruptcy in Canada ($75-150);
- Costs for two financial counselling sessions done as part of the bankruptcy;
- Preparation of and filing related income tax returns;
- Ongoing support throughout the bankruptcy process.
If you’ve filed bankruptcy before the fees payable will be higher, and the length of time before you will be eligible to be discharged (released) from bankruptcy will also be longer. Click here to learn more about filing for bankruptcy if you’ve been bankrupt before.
Bankruptcy Costs and Surplus Income
Your monthly after-tax income is the major factor that impacts both the amount of money you pay towards your bankruptcy, as well as how long it will take before you are released from bankruptcy.
While most people filing a personal bankruptcy will fall under the scenario of paying $200 per month for 9 months, if your household income (net of standard deductions as well as certain additional expenses) is above the government-set ‘superintendent’s standards’, you may be required to pay what is called ‘surplus income’.
- It’s important to understand that if you have surplus income, you will not pay the $1,800 bankruptcy fee AND your surplus income – you will instead pay either $200 per month for 21 months (to a total of $4,200) or your surplus income amount for 21 months (whichever is the higher amount).
- The income standard used to calculate surplus income varies depending on the number of people in your household and is generally adjusted each year to account for increases in cost of living.
- Money paid as surplus income is done for the general benefit of your creditors, since this will usually mean they will receive some return on the debts that are being forgiven.
A single person has net (take-home) pay of $2,700 per month.
The monthly superintendent’s standard for a one-person household (for 2020) is $2,243.
$2,700 – $2,243 = $457
$457 x 50% = $228.50
Monthly bankruptcy payment (surplus income) is $228.50 total, for 21 months.
Some Key Points About Surplus Income
- There are many variables when it comes to surplus income and people commonly have expenses (i.e. childcare, medical costs) which can reduce how much surplus income they need to pay;
- Only 50% of surplus income (net income exceeding the superintendent guidelines) needs to be paid;
- If surplus income is payable, the bankruptcy period will be extended from nine months to 21 months (in a first-time bankruptcy).
A Licensed Insolvency Trustee will help you review your specific situation and estimate any surplus income obligations with you before you commit to bankruptcy. If surplus income is likely, you may wish to consider making a Consumer Proposal as an alternative to filing a personal bankruptcy.
Get the facts about bankruptcy, debt consolidation and Consumer Proposals from a caring debt expert – book your free debt consultation with a local Sands & Associates representative today. Your financial fresh start is waiting!