Cost of a Bankruptcy

Once you’ve filed for Bankruptcy and your creditors are notified, your Licensed Insolvency Trustee will give you forms to fill out each month. You’ll use these forms to document your income and expenses. The government has set income thresholds that allow for a reasonable standard of living. A portion of any earnings over that threshold will be paid as part of what’s known as a ‘surplus income payment’.

In a Bankruptcy, payments and fees received by your Licensed Insolvency Trustee may include:

• Surplus income payment (if required)
• Administrative fees
• Income tax refund for the year you file (and prior years, where applicable)
• Non-exempt asset repurchase payments

How are Bankruptcy fees determined?

Upon filing for Bankruptcy your creditors will be notified and your Licensed Insolvency Trustee will have you fill out some paperwork — this will be used to document your income, expenses, assets and debts.

The federal government has set income thresholds which allow for a bankrupt individual to repay their creditors while still maintaining a reasonable standard of living — income over these thresholds is called Surplus Income and you pay a percentage of that into the Bankruptcy. Based upon the income, expenses and assets you disclose, you will fall into one of two categories, with the fee structure being different for each:

If you fall above the prescribed threshold, you will be classified as you will be a higher income bankrupt. In this case you will be required to turn over half of any surplus income to your trustee for payment to your creditors. The trustee will collect their fees from this surplus income, the sale of your assets or a combination thereof. There will likely be no additional payments required from you.

If you fall below the prescribed threshold, however, you will be classified as you will be a lower income bankrupt. In this case you will not have any surplus income and depending if you have assets to sell you will be required to pay an amount towards the trustee’s fees — which vary depending on the situation — directly. Considering your situation, MNP will often allow you to pay these fees over time.

What does filing for Bankruptcy cost?

Bankruptcy fees are federally legislated and vary depending on the situation.

If you have surplus income or assets that can be turned over to your trustee, you may not absorb any upfront costs when you file for Bankruptcy.

If you do not have surplus income or assets, you will need to negotiate a fee arrangement with your trustee. Your Trustee will tailor your fee arrangements to your unique personal situation.

How will Bankruptcy impact my credit score?

The process of filing for Bankruptcy is intended to help you wipe your slate clean with a financial fresh start. With that said, there will be some immediate impacts to your credit score which you should be aware of. These will affect your ability to borrow money for the first few years after your claim.

From the date your Bankruptcy is discharged (usually nine months for a first time Bankruptcy, and up to 36 months for second or subsequent Bankruptcy), your Bankruptcy will remain on your credit bureau report for a period of six to seven years. This sounds like a long time, but although the claim will be known to creditors, you will not be classified as bankrupt during that time. That means you can still work on rebuilding your credit — taking the final step to erasing the last remaining traces of your past debt situation once and for all. There are things you can do both during and after your Bankruptcy to improve your credit rating and we will discuss those with your during the two required counselling sessions.