The Dollars and Cents on Bankruptcy Costs
Living in Ottawa, you might be worried about declaring bankruptcy. After all, aren’t you declaring you have no money? Will you be able to afford it?
Don’t worry! We will develop a budget with you that will permit you to pay your ongoing essential monthly expenses and the required monthly payment to us, as Licensed Insolvency Trustee (LIT). How much will the monthly payment be? How much will the bankruptcy cost? The cost of bankruptcy, as determined by the federal Bankruptcy and Insolvency Act (BIA), is the greater of two amounts that we will calculate and discuss with you.
The first amount is the minimum amount we require to administer your bankruptcy. The sum required to pay the various taxes we must remit on your behalf, and the compensation we require to properly complete the many duties and tasks we are required to perform. That said, a typical minimum fee to administer a straightforward bankruptcy of a first-time bankrupt is approximately $2,700, paid at a rate of $300 a month for nine months. Of note, of the $2,700, we must pay over $500 in taxes to the federal government.
The second amount is the sum of the following: A) the statutorily required monthly amount you must pay to us, as an LIT, from your income during the bankruptcy; and B) the equity in non-exempt assets you wish to retain possession of.
Statutorily required payments calculated by reference to your post-bankruptcy income are referred to as Surplus Income payments. The amount of these payments, and the length of time you must make them, are determined by many factors, including; whether you have been bankrupt before, your income, the income of other members of your family unit and permitted deductions from income (statutory deductions, employer-imposed deductions, business expenses of self-employed bankrupts as permitted by the Income Tax Act, child support, spousal support, child care, certain medical expenses and various other prescribed expenses that are not commonly claimed).
Exempt assets include most individuals’ personal and household belongings, equity in a vehicle to $7,117, equity in principle residence if less than $10,783, RRSPs, RDSPs and RIFs with the exception of the prior twelve months’ contributions, and certain life insurance policies.
Non-exempt assets include a non-registered investment, an RESP, a home (if equity is in excess of $10,783), a second vehicle or an RV. It is the equity in these assets that you must pay to the LIT if you wish to retain possession of them. As with the required monthly payments from your income, we will enter into a monthly payment agreement to permit you to keep assets you wish to retain and can afford to buy back.
We rarely, if ever, charge up-front fees. Affordable monthly payments are the norm. We truly want to help you get your finances in order!
As discussed above, determining how much a bankruptcy will cost is a function of many factors. We believe that each individual’s circumstances, goals and aspirations are unique and they must be taken into careful consideration when determining the amount to be paid and the length of time needed to pay it.
If you would like to discuss the estimated cost to file for bankruptcy, please contact our office today to arrange a no-charge initial consultation. During the consultation we will thoroughly review your finances, discuss your options, answer your questions, discuss the estimated cost of filing for bankruptcy, and the length of time you will have to make payments to us, as an LIT.