Our short video on the 3 main factors that affect what it costs to file for bankruptcy.
For more information, read our full article How Much Bankruptcy Costs
There is a financial cost to bankruptcy, and it’s different for every person who goes bankrupt. That’s because the government has decided that the more you earn and the more you own, the more you have to pay to your creditors.
First let’s look at the cost based on your income.
The government knows you need income to live on, so they allow you to keep a portion of your income for living expenses. The amount you get to keep is based on your family size. The bigger your family, the more you get to keep.
Earn income over this threshold and you have to pay half of this surplus income to your creditors.
The second cost of bankruptcy is based on the assets you own.
In a bankruptcy you don’t lose everything. Just like with your income, the government created rules of what you can keep, and what your creditors can have. The rules differ by province, but in Ontario you can keep:
- most personal possessions and household furnishings;
- tools you need for work;
- one motor vehicle depending on its value;
- most pension and RRSP savings except recent contributions to an RRSP
There are dollar limits on the value of assets you keep but in most cases people find the limits high enough to protect their basic belongings.
Your creditors are entitled to:
- any equity in your home;
- investments and other assets;
- RRSP contributions you have made in the last year;
- tax refunds you might be entitled to up to the year you go bankrupt.
If you have a lot of assets or a high income, you should talk to your trustee about a consumer proposal. You can negotiate a plan to settle your debts and keep your assets.
If you don’t have any assets and don’t earn any income, you may not even have to file bankruptcy but if you do, you will need to make payments to cover the cost of administering your bankruptcy.
Your situation is unique. To get an estimate of what your bankruptcy might cost, please call or email us to arrange a no charge initial consultation with a Hoyes Michalos professional.