Most bankruptcy trustees in Canada will quote a fee to administer your bankruptcy. However, that "fee" may be only one of the costs that you will be required to pay if you go bankrupt, so before you go bankrupt be sure to have your trustee explain all of the costs to you in detail.
There are four typical costs of a bankruptcy in Canada.
First, most trustees will require you to make a minimum contribution each month for as long as you are bankrupt; the minimum bankruptcy period is nine months, but if you were previously bankrupt, or if you earn above average income, or if there were unusual events that contributed to your bankruptcy, the bankruptcy period may be longer than nine months.
Second, you are required to make an additional payment based on your take home pay each month, and the size of your family. This excess income is called surplus income, and the amount of income you are permitted to earn each month before you must make an extra payment is defined by the federal government. The more you earn, the more you are required to pay each month. You will be required to send your trustee copies of your pay stubs and other income each month, and each month the trustee will calculate the required surplus income payment.
Third, you would lose any tax refunds or GST credits you are otherwise eligible for during the bankruptcy period.
Fourth, you must surrender certain assets (such as non-exempt RRSPs, valuable cars, and real estate) that you own when you go bankrupt.
It is possible to make payment arrangements with your trustee so that you pay for your bankruptcy in monthly installments, but these arrangements should be made prior to starting the bankruptcy process.
If you find that due to your income and assets the cost of a bankruptcy may be excessive, a consumer proposal may be a better option. Before starting a bankruptcy ask your trustee to explain all of your options, including a consumer proposal.
Knowing the costs of bankruptcy in advance will help you decide if bankruptcy is the correct option for you, and it will allow you to budget your resources accordingly so that the bankruptcy process is as quick and painless as possible. If you start with all of the facts, personal bankruptcy will be what it was designed to be: a fresh start.
J. Douglas Hoyes is a chartered accountant, licensed trustee in bankruptcy, and co-founder of Hoyes, Michalos & Associates Inc., one of Ontario, Canadas largest personal insolvency firms helping people understand bankruptcy, and all of their bankruptcy alternatives. Visit http://www.bankruptcy-canada.ca for information about bankruptcy in Canada and choosing a bankruptcy trustee
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