“How much does it cost to file for personal bankruptcy?” This question is a very common one – for obvious reasons. If you are struggling financially you need to understand if bankruptcy is an affordable option to resolve you debt.
This guide while help you understand one of the key components of the cost of filing for bankruptcy – the Superintendent’s Standards.
What is Personal Bankruptcy?
Personal bankruptcy is a legal process designed to provide debt relief to individuals who are unable to repay their debts. In Canada, this process is regulated by the Office of the Superintendent of Bankruptcy (OSB) and administered by Licensed Insolvency Trustees (LITs).
Understanding the Superintendent’s Standards
The Superintendent’s Standards are set by the OSB to ensure a fair and consistent approach to bankruptcy across Canada. These standards determine how much you need to pay if you declare bankruptcy, based on your income and family size. The figures are updated annually.
The cost to file for bankruptcy in Nova Scotia is the exact same as any other province.
Your Bankruptcy Payments
- Determine Your Income: Start by calculating your total net monthly income. This includes your salary, pension income, business income, rental income, and other sources of income.
- Assess Your Family Size: Your required bankruptcy payment is determined by the size of your family. A larger family size means higher living costs, which are considered in the calculation.
- Calculate Surplus Income: The OSB sets income thresholds for different family sizes. If your income exceeds this threshold, you have ‘surplus income’. Half of this surplus income must be paid into your bankruptcy estate.
- Consider Special Circumstances: Certain “non-discretionary expenses”, such as child support, spousal support, expenses as a result of a medical condition, fines or penalties ordered by the Court and expenses as a condition of employment can be deducted from your income before calculating surplus income.
Below are a 2 example calculations. As illustrated, the calculation becomes more complex when only one spouse is filing for bankruptcy. Our bankruptcy payment calculator can give you an idea of what your payment would look like based on your family size and income (in a situation like Example 1),
Example Calculation 1:
A joint bankruptcy is filed.
- Income: $4300 per month
- Family Size: 3
- Income Threshold for Family of 3: $3891
- Surplus Income: $4300 – $3891 = $409
- Bankruptcy Payment: 50% of $409 = $204.50 per month
Example Calculation 2:
A single bankruptcy is filed.
- Income: $4300 per month ($3000 – bankrupt/ $1300 non-bankrupt)
- Family Size: 3
- Income Threshold for Family of 3: $3891
- Surplus Income: $4300 – $3891 = $409
- Percentage of Household Income = 69.76%
- $409 x 69.76% = $285.32
- Bankruptcy Payment: 50% of $285.32 = $142.66 per month
- Duration of Payments
Typically, if this is your first bankruptcy and you have surplus income, you will need to make payments for 21 months. If it’s your second bankruptcy, the period extends to 36 months. The length of a third bankruptcy is determined by the Court.
Other Considerations
If you have realizable assets which you want to keep – the buy-back of these assets is not covered by the Superintendents Standards.
If the monthly Standard payment is beyond what you can afford, offering a consumer proposal with payments over a longer period of time may be a more viable solution.
If your income is below the Superintendent’s Standards, the trustee will arrange a payment arrangement to pay for the filing fees for your bankruptcy.
Conclusion
Calculating your bankruptcy payments can be complex, and the Superintendent’s Standards ensure fairness in this process. We recommend consulting with a Licensed Insolvency Trustee who can provide personalized advice and guide you through the bankruptcy process.
Contact an LIT
For a detailed assessment to discuss you debt relief options, contact us via phone or email.