How Much Will it Cost to File for Bankruptcy in Canada?
You may easily perceive that personal bankruptcy will not cost you any penny. As you explore the different debt relief solutions, you must as well acknowledge the expenses of each. It might be compelling as it sounds that bankruptcy will eventually eliminate your debts, yet understanding its impact and the expenses you are required is also overwhelming.
Most Canadians think that other debt relief solutions will cost much of their time, effort, and money. The reality is, before getting into a proposition to file for bankruptcy, you should equip yourself with a broad understanding of its process. You might be even surprised that debt settlement and a consumer proposal are more feasible and care-free.
Moreover, in contrast to what you expect, bankruptcy entails cost and expenses, which are both personal and financial. So, before throwing in the towel, make sure you’re ready for the possibilities at stake.
Personal Costs of Bankruptcy
Bankruptcy may require your personal expense as it is not a process that ends by just signing a single document. It is not something that can be done overnight or with just a snap of your finger.
Time
Complying for the required paperwork and reaching out to your bankruptcy trustee can take much of your time.
Contracts and Agreements
Considering the damage that it causes in your credit repute for up to 7 years or more, it will be uneasy for you to obtain a mortgage or car loans.
Service
With your credibility and creditworthiness torn apart, you need to abstain as a company director.
The Financial Costs of Bankruptcy
More than the efforts that you exerted in the filing, bankruptcy costs a huge amount of monetary value; before the discharged of your debt, you will have to pay a significant cost that isn’t related to any debt relief solutions like debt settlement, debt consolidation or credit counseling.
Asset Costs
Once you file for bankruptcy, your bankruptcy, you will surrender your valuable assets to your trustee. Your trustee will then arrange a trust where your assets will be deposited. On the other hand, you don’t have to worry since not all your assets will be seized during the discharged. However, the assets that you will have to surrender will largely depend on your province or territory. Commonly, the assets that you may need to give up include motor vehicles, jewelry, principal residence, household furniture, and appliances and a lot more.
Base Contribution Cost
The bankruptcy trustees will charge you for a monthly contribution during the process. Hence, their service is not for free as you having to contribute to administrative overhead, paperwork, and the other costs of managing your situation. This cost is legally required since your trustees are not getting funds from the government or creditors during the process. Licensed bankruptcy trustee contribution in Canada is valued at $200 or more each month. This number might increase if your income is higher than average, or you own the business itself.
Surplus Income Cost
Keep in mind that during bankruptcy, the Canadian bankruptcy law stipulates an average limit of your income. Your earnings that are exceeding this limit is referred to as your surplus income. Your trustee will deposit your surplus income in your trust and will use this trust to pay your creditors. You will have to comply in presenting your tax documents and pay stubs so that your trustee can calculate your surplus income. If you are required to pay for surplus income, this can extend your discharge for up to twelve months instead of the nine months automatic discharged.
