What does bankruptcy cost?
Bankruptcy doesn’t really “cost” anything in the traditional way of thinking, even though money might be leaving your pocket. Amounts you may pay go to repay a portion of what you owe to the companies and individuals whom you owe money to. The Trustee is paid based on a formula from the total receipts in the bankruptcy, and because of that, it is said that the creditors pay the Trustee.
If you don’t have any available assets and don’t earn more than a certain threshold, your Trustee will usually ask for voluntary payments to cover the cost of administering your bankruptcy. These fees are usually approximately $2,000, payable over the time of your bankruptcy in monthly installments. In order to receive your discharge, you must make all of the payments to the Trustee.
The amounts which you pay in a bankruptcy are based on three main areas:
- your income
- your assets, and
- in some circumstances an amount determined at the time of your discharge.
At the initial consultation, your Trustee will review the value of each of your assets based on information known at the time. For example, the Trustee reviews statements from your insurance policies and investments, the value of your vehicle, the value of your home, and a multitude of other assets. A detailed discussion on how we treat specific assets including examples on how we calculate the amount required to be paid can be found in the assets section of our website. For each asset, the Trustee can either redeem that asset (such as cash out an investment), or would need to receive a similar amount from a third party.
At the initial consultation, your Trustee will perform a detailed surplus income calculations with you, including various scenarios showing you what happens if your income were to change. These calculations are unique to your circumstances and will vary based on your household income, certain expenses, and the number of people in your household. During your bankruptcy, you are required to keep the Trustee informed on changes to your income. The Trustee will regularly update its calculation and the required payment in your bankruptcy.
Surplus income is calculated by:
- Add the monthly take-home income of all members of the household including you
- Subtract the standard from the table below based on the number of people in your family unit, including you.
- If there is more than one person in the household, multiply the result by your percentage of the total income.
(Your Income) / (Your Income + Spouse’s Income + Other’s Income)
- Divide by two to get your monthly surplus income payment in a bankruptcy
|Number of Persons||Standard (2018/2019)|
A more detailed discussion, including examples of various calculations, is discussed on our surplus income page.
An opposition to a bankrupt’s discharge can happen for three reasons:
- Your Trustee will oppose your discharge if you have not complied with your duties such as attending meetings, making payments, and being honest throughout the bankruptcy process.
- A creditor can oppose your discharge for any reason, but usually only if they feel wronged by something you have done, such as lying on a credit application. Unexpected creditor oppositions are rare and your Trustee can usually identify potential reasons for opposition at the time of your consultation.
- The Superintendent of Bankruptcy will oppose your discharge if they believe that your bankruptcy is unusual and deserves a second look from the Court.
Certain circumstances require a discharge hearing irrespective of whether a creditor has opposed your discharge. Examples include if you have been bankrupt two or more times before your current bankruptcy, or if you owe more than $200,000 in personal income tax which comprises over 75% of your total debt. Your Trustee will discuss these scenarios with you at the time of your free consultation.
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