Who Pays For Bankruptcies? How Much Does Declaring Bankruptcy Cost In Ontario?

You may be surprised to learn that filing for Bankruptcy in Canada isn’t free. The cost of filing differs from person to person depending on your monthly income, the size of your family, your expenses and your assets. The fees are set by the federal government and regulated by the Office of the Superintendent of Bankruptcy. This article explains the costs involved and what you can do if you can’t afford to pay.

Bankruptcy Fees and Costs in Canada

The Bankruptcy and Insolvency Act details all the regulations of Bankruptcy in Canada. Each province and territory has specific rules for their jurisdiction, including the fees you must pay. You can have three types of costs when you file for Bankruptcy. You may have to pay one, two, or all three.

The amount you pay depends on your financial situation. You’ll have filing fees and possibly surplus income costs. You may also have to surrender some assets to pay your creditors. You pay these expenses because the government, taxpayers and creditors don’t cover them.

Filing fees

A Licensed Insolvency Trustee (LIT) must file for Bankruptcy on your behalf. LITs offer a free consultation. If you and your LIT decide Bankruptcy is the best option, you pay fees to file.

The filing fee covers administrative costs like preparing documents and filing with the Office of the Superintendent of Bankruptcy (OSB). Filing fees also cover your LIT’s time and the cost of the two credit counselling sessions you must attend.

If your financial situation is complicated, you might need the services of a lawyer, accountant, or other experts to assist you.

Currently, filing fees are $2,250 if this is your first Bankruptcy. You’ll pay your LIT in nine monthly installments of $250. After you pay the nine monthly installments, you’ll receive a Discharge from Bankruptcy, and your debts will be gone.

Surplus Income

The government in Canada sets the maximum amount of net income you can have while you’re in Bankruptcy. The amount of allowable income is based on your family unit’s income and expenses.  If the net income of your family unit exceeds the allowable amount after deductions, you might have to use your extra income to make surplus income payments to your creditors.

You don’t need to make additional payments if your surplus income is $200 per month or less. If it exceeds $200, you must pay 50% of the excess amount to your LIT, who will distribute the funds to your creditors. If you must make surplus income payments, it will extend your Bankruptcy for an additional 12 months. So, you will be in Bankruptcy for 21 months before you’ll be eligible for a Discharge of Bankruptcy.

Several factors can impact the amount of your surplus income payments. The amount can vary depending on your family situation, if your income changes while you’re in Bankruptcy, or if you receive any type of cash windfall. You must submit monthly financial statements to your LIT. Your LIT will determine how much surplus income you have based on your financial statements and if you need to make surplus income payments.

Your assets

You can keep certain assets in all provinces, including Ontario. If your assets exceed the value set by the government, your LIT needs to convert them to cash and use the funds to pay your creditors. According to the Ontario Execution Act in 2023, you can keep:

• $10,783 of equity in your home.
• A vehicle worth up to $7,117.
• Tools and equipment you use to earn a living valued up to $31,379 or up to $14,405 if not used for work purposes.
• Furnishings and appliances with a value of $14,180.
• Money in your RRSP or RRIF for contributions not made in the last 12 months.
• All clothing for you and your family.

Your LIT can convert assets that exceed these values to cash and use them to pay your creditors. In addition, investments such as money in a bank account, Tax-Free Savings Account, Registered Education Savings Account, tax refunds and cash windfalls can also be used to repay the debt you owe.

Who pays for Bankruptcies?

If you need to file for Bankruptcy but don’t have the money for the fees, who pays for the Bankruptcy? The good news is that help is available if you need assistance paying your Bankruptcy fees.

The first step is to speak with a LIT to assess your situation. Make sure there is no charge for an initial meeting. The LIT will work with you to understand your financial situation. It might be better for you to file a Consumer Proposal instead of a Bankruptcy.

If filing for Bankruptcy is your best solution, contact the Office of the Superintendent of Bankruptcy (OSB). They have a referral program and will appoint a LIT to help you. You may have some fees, but they’ll be lower than if you were to pay for the entire cost of Bankruptcy yourself.

Other options

Filing a Consumer Proposal can be an alternative to filing for Bankruptcy. A Consumer Proposal can reduce the amount you owe by up to 80%. You can have up to five years to repay the remaining amount. A Consumer Proposal allows you to keep assets and avoid surplus income payments. You need a LIT to file a Consumer Proposal on your behalf. Your LIT will work with you to find the best solution to deal with your debt, depending on your financial situation.

Where to Get Help With Your Debt

Knowing who pays for Bankruptcy and how a Consumer Proposal can be a good alternative will help you decide how to handle your debt. The first step is to contact a Licensed Insolvency Trustee. Please call Adamson and Associates at 519-310-5646 to book a free consultation.

Our Licensed Insolvency Trustees will work with you to find the best solution for your debts. Once you know the fees and the pros and cons of filing for Bankruptcy or a Consumer Proposal, we’ll work with you to get rid of your debt so you can get a fresh start.