How Much Does Bankruptcy Cost in Canada?

  1. Home
  2.  » 
  3. Bankruptcy
  4.  » How Much Does Bankruptcy Cost in Canada?

It is a fact that it costs money to claim bankruptcy in Canada. The bankruptcy cost varies for each individual as it depends on monthly income, expenditures, family size, and investments. A LIT assists you throughout the bankruptcy process; hence LIT can only provide you with the exact costs considering the specifics of an individual situation. So, there is a range of costs associated with going bankrupt. Understanding the total cost of bankruptcy is necessary before you decide to file.

Initially, there is no upfront cost in filing for bankruptcy. Your initial consultation with a Licensed Insolvency Trustee is free of cost. The Trustee assesses your finances and recommends filing a consumer proposal or bankruptcy free of charge.

If you proceed with the filing based on the Trustee’s recommendation, you will incur costs.

The Financial Costs of Bankruptcy

Base contribution cost

The first bankruptcy cost covers administrative fees and expenditures and paying the Licensed Insolvency Trustee for their time. For a first-time filing, the minimum charge is $1,800, broken into nine monthly instalments of $200. This is known as the base contribution cost.

Surplus income cost

The second bankruptcy cost only applies if you surpass the threshold for surplus income by more than $200. The Canadian government says you only require a certain amount of income to live while you file for bankruptcy. You must pay surplus income costs if you earn over $200 over the surplus income threshold the government sets. This also extends the time it takes to file for bankruptcy. Instead of 9 months, a first bankruptcy takes 21 months. For a second bankruptcy, the time is extended from 24 months to 36. The Office of the Superintendent of Bankruptcy sets the annual surplus income limit. Family size is a factor, as a bigger family has a higher surplus income threshold. Your Licensed Insolvency Trustee tells you how much you are expected to pay. You must regularly submit tax documents and pay stubs to the bankruptcy trustee to prove your income during your filing.

Asset cost

The final cost of bankruptcy depends on the value of your assets. Losing your assets is usually one of Canadians’ key considerations when considering bankruptcy. Your bankruptcy results in liquidating assets that do not qualify for an exemption. Hence, the Trustee oversees the sale of these assets, and then uses the funds from the sale to pay your creditors.

Personal Costs Of Bankruptcy

Monetary costs are not the only cost associated with filing for bankruptcy. You face some personal costs as well as a result of bankruptcy.

Time cost

Filing for bankruptcy takes time, and specific tasks must be completed during your filing. Thus you need to set aside time to handle these tasks. You must complete paperwork and submit documentation regularly to the Trustee.

Credit cost

Bankruptcy appears on your Equifax credit report for six years after your debts have been discharged; it’s noted for six to seven years on your TransUnion report, depending on the province or territory where you live. You won’t be able to take on new lines of credit while going bankrupt. After discharge, you can still struggle to get traditional loans and credit cards.

Professional cost

You cannot serve as a company director while you are in bankruptcy which affects your professional life too.

If you’re concerned about any of the personal or financial costs of bankruptcy, there are other alternatives like credit counselling, debt consolidation, debt settlement, consumer proposal that you can consider. If you need any assistance, contact Dana MacRae Licensed Insolvency Trustee without wasting time. 

× How can I help you?