cost to file bankruptcy

How Much Does It Cost to Declare Bankruptcy?

You might be surprised to learn that there is a cost to file for bankruptcy. This may seem illogical because if you had money you would likely just pay your debts. The good news is this cost is regulated by the Federal Government and all fees are checked by the Office of the Superintendent of Bankruptcy to provide protection to the public. This may sound great, but the question still remains, how much does it cost to declare bankruptcy?

In most personal bankruptcies, the direct cost to the person filing bankruptcy is $1,800. You might be thinking that given this cost, you can’t afford to file bankruptcy. However, this is not the case as you do not have to come up with that amount on the first day.

As we understand the financial burden most people face, our office offers monthly payments over a nine-month period which will coincide with a person’s discharge from bankruptcy. This translates to either ten payments of $180 or nine payments of $200 in most cases. However, there is a difference between Licensed Insolvency Trustee (LIT) firms in how much is required for the first payment. At our office, we have started the bankruptcy process for people for a beginning payment of $100.

If you still feel that $180 or $200 per month is too much for you, please contact our office so we can discuss the specifics of your situation and what alternative options might be available to you. Depending on your specific situation payments could be as low as $75 per month.

Generally, when a person stops paying their debts, there often is enough money in the budget to afford the monthly payment for bankruptcy costs.

What Services Are Included?

The following services are included in the bankruptcy cost:

  • A filing fee paid to the Federal Government of $76.65 in order to register the bankruptcy
  • Preparation and filing of bankruptcy documents
  • Notifying your creditors that they must stop collecting from you immediately
  • Preparation and filing of tax returns for the year prior and the current year
  • Two mandatory financial counselling sessions designed to provide assistance to you in moving forward with your future finances, budgeting, and goal setting
  • Advice and support during the bankruptcy process
  • Getting garnishes removed from your income

You can be assured that there are no additional hidden fees or costs such as taxes or photocopy charges, as the tariff-based fee is strictly regulated by the Federal Government for the protection of the public.

Can the Cost Ever Rise?

The cost of $1,800 to file for bankruptcy can go up if certain conditions exist. These conditions include the following:

  1. You have surplus income. This is a phrase that describes a situation where your monthly take-home pay is, on average, greater than a threshold set by the Federal Government. The threshold varies depending on how many people are in your household and can be impacted if you have certain monthly expenses such as support payments or medical expenses. This will also increase the length of time it will take to get a discharge from bankruptcy from nine months to twenty-one months. As a result, your out of pocket cost will rise and your creditors will receive a payment via the bankruptcy.
  2. Your assets are worth more than the provincial exemptions. Bankruptcy laws allow people to keep a variety of assets to continue living and earning a living. If your assets are greater than the exemptions then you may have to pay the difference into the bankruptcy in order to keep the asset.
  3. You have filed for bankruptcy protection earlier in your life. A second or subsequent bankruptcy filing results in a higher cost than $1,800. The length of time to obtain a discharge is also extended to either twenty-four months or thirty-six months on most occasions. Please contact us for details

You might be surprised to learn that the cost is not determined by the amount you owe.

Is There a Cost to Find Out Your Options?

Bankruptcy protection might not be the only option available to reorganize your finances. As a result, it is important that you understand all of your options. A Licensed Insolvency Trustee is required by law to assess your situation and provide you with information on your different options.

At Chase & Associates, we provide a no-cost, confidential assessment so that you are fully aware of your options and in particular, how a bankruptcy filing would unfold. Including the overall costs.

There is no need to engage the services of a consultant prior to discussing your options with a LIT. In particular, you do not have to pay hundreds or thousands of dollars to find out your options.

Other Costs Related to Bankruptcy

Another cost to be aware of with filing for bankruptcy is that your credit rating will be impacted. It will drop to an R9 rating for a period of time. However, what most people are unaware of is that is only one factor a lender will look at when deciding to loan to you in the future.

As part of the two mandatory financial counselling sessions, we will provide you with guidance as to how to raise your credit rating and become eligible for credit in the future. Ultimately, it is up to each individual bank, company, or person to decide if they want to lend to you in the future. If you have steady cash flow, odds are you will find a lender.

The Cost of Not Filing for Bankruptcy Protection

While we have touched on many of the costs involved with bankruptcy, we have not yet discussed the cost of not seeking bankruptcy protection. When you have debt problems, there can be some serious life consequences by not taking any action to get protection from your creditors such as:

  • Relationship breakups or arguments
  • Poor health due to excessive stress or poor sleep
  • A creditor putting a garnish on your income

Final Thoughts

The cost of bankruptcy is often very small as compared to the amount of debt that is wiped away forever. At Chase & Associates our motto has always been “people come first.” As such, we will always take as much time as you need in order for you to completely understand the cost and how to make it affordable. Take advantage of our free initial assessment to ask questions and gain the information you need in order to obtain a debt-free future.

Derek L. Chase, CPA, CA, LIT

Being able to offer debt help assistance to individuals and corporations on a more intimate basis was a driving force in completing a “second CPA” by becoming licensed by the Federal Government as a Licensed Insolvency Trustee (previously Trustee in Bankruptcy) in 1997. It is extremely satisfying to be able to witness lives change for the positive due to a restructuring of financial affairs.