BankruptCy costs in Canada
Does it cost money to go bankrupt?
Yes, there are costs associated with filing for bankruptcy. When you file for bankruptcy, you are released from your debts at the date of discharge. Either by law or by agreement with your trustee, you will be required to make payments during the bankruptcy.
The money you pay to your trustee will be used to pay costs and will be distributed to creditors. The cost of filing for bankruptcy varies from person to person because it is based on your personal financial situation. During your initial free consultation, the trustee can outline the cost of filing for bankruptcy. Generally, your costs in bankruptcy can include:
Administration fees (to cover government fees, trustee’s time, mailings, etc.
Relinquishing of certain assets
Loss of your income tax refunds for years prior to, and during, bankruptcy
The trustee will take your total income, as well as personal and family situations into account and calculate the amount of your monthly payment to confirm what assets must be surrendered. A reputable trustee in bankruptcy will discuss your situation with you and outline the cost of filing for bankruptcy before charging you any money. You do not have to make a commitment until you feel comfortable doing so.
Moreover, at BDO, we will only recommend a debt solution that is appropriate for your financial situation. We will also discuss alternatives to bankruptcy with you that may better meet your specific needs.
How your asset values are calculated when filing for bankruptcy
If you have assets that are not exempt from seizure and are not secured, you will be required by law to disclose and surrender them to your trustee as part of the bankruptcy process. Each province has its own rules about what you can keep when filing for bankruptcy. Generally, you will be required to surrender:
The value of a car above the provincial exemption threshold (e.g. $5,650 exemption in Ontario)
Investments (like Canada Savings Bonds or other non-exempt assets)
Quarterly GST credits, which are automatically forwarded to the trustee
Tax refunds for prior years that you have not yet filed, and for the entire year that you are bankrupt
Any RRSP contributions that you have made in the last year
For further details, check out our information on bankruptcy exemptions in your province.