How Do You Calculate Payments in a Bankruptcy?

Many are surprised to hear that there is a cost to go bankrupt and that that is different for each person. Your trustee must consider your monthly household income, expenses, family size and assets when explaining to you what the financial implications of filing bankruptcy will be.

There are three different components to determining your payments in a bankruptcy:

1. Monthly contributions – Which is the fee to cover administrative costs including government fees, counselling session fees, the Trustee’s time as well as out of pocket expenses for mailing, preparation for filing your tax return etc. The usual standard cost is $200 per month per person.
2. Surplus income payments – You may be require to make extra payments, called surplus income, into your bankruptcy. These are based on your family income less certain allowed expenses (child and spousal support, child care, medical costs for example) less a specified amount the government says you can keep. Everything over this limit, you will pay 50% into your bankruptcy.
3. Assets – You surrender certain assets to a trustee in exchange for the elimination of you debt or you keep the asset and buy back the asset. Assets you will be required to surrender are:

• Equity in your house if it is over $10,783
• The value of a car with no loans if it is over the exemption of $7,117
• Investments (like Canada savings bonds or other non-exempt assets)
• Tax refund for prior years that you haven’t filed and for the year that you are bankrupt
• RRSP contributions that you have made in the last year

So while the base payment may be the same, each persons cost is different because their family income and family size is different and the assets they may lose will also differ.

To find out what it would cost you to file for bankruptcy or how to calculate payments in a bankruptcy call our office at 310-PLAN.