In this guide
This guide explains how bankruptcy costs are calculated, including base fees, surplus income payments, and how your assets affect what you pay.
One of the biggest misconceptions about bankruptcy is that there is a single fixed cost. In reality, the cost is driven by income, household size and assets, which is why two people with similar debts can end up paying very different amounts.
How much does it cost to file for bankruptcy?
Before we get into the cost of filing for bankruptcy, it’s worth noting that there are no initial fees for debt advice. Your first session with a Licensed Insolvency Trustee is free. They can determine the exact cost of your bankruptcy based on your specific situation, explain the pros and cons of bankruptcy, and explore available alternatives.
Average bankruptcy cost examples in Canada
| Situation | Typical monthly payment | Typical duration | Typical total cost |
|---|---|---|---|
| First-time bankruptcy, low income (no surplus income) | ~$200 | 9 months | ~$1,800 |
| First-time bankruptcy, moderate surplus income | $200–$400 | 21 months | ~$4,000–$6,000 |
| Second bankruptcy, no surplus income | ~$200 | 24 months | ~$4,800 |
| Second bankruptcy, surplus income applies | $300+ | 36 months | $7,000+ |
What would bankruptcy cost you?
Get free, honest debt advice from a Licensed Insolvency Trustee by video, phone or in person.
- Know exactly what you’d pay
- Find out if surplus income applies
- See which assets you keep
- Compare it against a consumer proposal
- No upfront fees
or call 1-587-701-5681
Administrative costs
Based on our experience administering first-time bankruptcies, many low-income cases result in a total cost of around $1,800, typically paid over 9 months, during which income remains below the government’s surplus income threshold.
This cost covers administrative expenses, government filing fees and the work of the Licensed Insolvency Trustee.
How surplus income payments are calculated
When you file for bankruptcy in Canada, your income and family size determine how much you pay each month. If your income increases, your payment will change, and your bankruptcy will take longer to complete. This is called surplus income.
Every year, surplus income thresholds are set by the government Office of the Superintendent of Bankruptcy to ensure you have enough money to maintain a minimum standard of living during bankruptcy.
Surplus income payment examples
If your income exceeds the monthly threshold by more than $200 per month, you are required to pay 50% of the excess amount as a “surplus income payment”.
For example, if your monthly income is $500 above the limit, you would be required to make a monthly payment of $250.
Your bankruptcy trustee will ask you to submit proof of your income every month, so they can determine if you need to pay. Some expenses can be deducted from your income, including child support payments, child care, and medical expenses.
How surplus income affects bankruptcy length
Surplus income also affects how long your bankruptcy will last.
If your monthly income is high enough that your surplus payments average more than $100 a month, your bankruptcy will be extended for another year, meaning it will take 21 months instead of 9 months for a first-time bankruptcy.
That extra year exists because the government expects higher-income earners to contribute more before being discharged.
If this is your second bankruptcy, surplus income extends the process to 36 months rather than 24.
If you have a high income, a consumer proposal is often the more budget-friendly choice compared to a bankruptcy filing. You can avoid surplus income payments altogether and retain your assets while paying only part of what you owe.
Not sure what bankruptcy would cost you? A Licensed Insolvency Trustee can tell you exactly what to expect and explain alternatives, like a consumer proposal. Get a free consultation
The cost of your assets
When you declare bankruptcy, you must surrender certain assets to your Licensed Insolvency Trustee. Each province and territory has different rules on what assets you can keep.
Your trustee can sell some assets, with the proceeds distributed to your creditors. Depending on where you live, this might be home equity, an expensive car, RRSP contributions made in the last year, a tax refund or investments.
Items such as clothing, healthcare supplies, household furnishings, and work tools are generally protected. Some provinces have bankruptcy laws that also protect your vehicle and a portion of your home equity.
For example, under Ontario’s Execution Act, your principal residence is exempt from seizure in bankruptcy if the equity in your home does not exceed $10,783, meaning you can generally keep it.
Source: Government of Canada – Office of the Superintendent of Bankruptcy, Ontario residence exemption
If you own something you want to keep, you can pay your trustee its value instead of giving it up.
For example, if you have a second, non-exempt car worth $1,500, you can offer to pay $1,500 to your trustee to keep it rather than have the trustee sell the asset. The trustee then distributes the payment to your creditors, and you retain the asset. This is called a repurchase agreement, or sometimes called “buying back” the asset.
If you receive an inheritance or windfall, your trustee must take the money and distribute the proceeds to your creditors. Anything left over after paying the creditors in full, plus 5% interest, and any administrative fees or levies in the bankruptcy, is returned to you.
How Licensed Insolvency Trustee fees work in Canada
When you file a basic personal bankruptcy (called a Summary Administration), a trustee’s fees are taken from your bankruptcy payments each month at no additional cost to you. You do not pay anything extra.
If your payment is $250 a month, that is all you pay. The trustee’s fee is deducted from that amount before any funds are distributed to your creditors.
The federal government regulates all trustee fees under Rule 128 of the Bankruptcy and Insolvency General Rules. The rule sets out exactly how trustees are paid for a summary administration, which is how most personal bankruptcies in Canada are handled.
Source: Government of Canada – Bankruptcy and Insolvency General Rules, Rule 128
The calculation is based on what the trustee collects in your bankruptcy estate after deducting necessary expenses (such as selling costs or secured-creditor payments).
The fee currently is:
- 100 percent of the first $975 of receipts
- 35 percent of the next $1,025 (from $975 to $2,000)
- 50 percent of anything collected over $2,000
Trustees can also recover small fixed items such as filing fees, counselling costs, and taxes, plus a $100 administrative allowance.
In plain terms, this means your creditors effectively pay the trustee’s fee through the money in your bankruptcy estate, not you personally. Your monthly payment already includes everything.
These structured bankruptcy fees ensure every Licensed Insolvency Trustee in Canada is paid the same way, and that debt help remains fair and affordable for everyone.
What affects the cost of bankruptcy?
| Factor | How it affects cost |
|---|---|
| Income level | Determines whether surplus income applies |
| Household size | Changes surplus income thresholds |
| Assets | May need to be surrendered or repurchased |
| First or second bankruptcy | Affects length and total cost |
| Province | Determines asset exemptions |
How much will bankruptcy cost you?
The cost of bankruptcy in Canada isn’t the same for everyone. Your income, household size, and assets affect the cost of bankruptcy. There’s no online calculator that can give you an exact number because each case has different variables.
There are many alternatives, so you must first determine whether bankruptcy is the best option to address your debts.
If you have a high income or assets to protect, a consumer proposal might suit you better, as it allows you to pay a fixed amount and keep your assets.
The only accurate way to know what you’d actually pay is to speak with a Licensed Insolvency Trustee. They’re the only professionals in Canada legally allowed to file a bankruptcy or proposal, and their advice is free.
At Moses Advisory Group, we offer a free, confidential consultation. During the meeting, we will:
- Review your income and expenses
- Explain all your debt relief options
- Tell you exactly what bankruptcy would cost in your situation
You’ll walk away knowing exactly the cost of a bankruptcy and what your other debt relief options are. There’s no obligation to go ahead.
