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March 2005 - The Cost of Filing Bankruptcy

The Cost of Filing Bankruptcy

☳ by Adam Aspilla

Bankruptcy is only a solution of last resort when all other options fail. This is what I stressed all along in my previous articles, and I’m happy to hear that my message got across.


Nevertheless, there are some misinformed who filed for bankruptcy although another options are still available. As a consequence, they lost their assets including house, cars, RRSPs and investments. And this is so unnecessarily.


In answer to queries I received concerning the cost of filing bankruptcy, everyone who files for bankruptcy would pay a trustee fee regardless of income, assets and liabilities of the person filing, contrary to misconception that there is no fee in filing for bankruptcy.


If a person has assets more than the value he/she is allowed to keep, she/he could not file for bankruptcy without losing the excess assets for the creditors would seize the excess assets through a trustee.


Assets include RRSPs, vehicles, equity from a house or real estate properties and other investments.


And here’s another downside to the equation. If a person has excess disposable income more than he/she is allowed to earn during the bankruptcy process, the excess income would be taken by creditors.


Excess income is determined by various factors like: monthly take home pay of the applicant, number of dependents the bankrupt is supporting, babysitting expenses, medical expenses and child support.


If an applicant for bankruptcy has excess assets or excess disposable income or both, trustee fee would be taken from the excess income or assets. A bankrupt person is not required to pay extra $1,300.00 an average trustee fee for filing bankruptcy.


On the other hand, if an applicant for bankruptcy has no excess asset or no excess income, a trustee would require an applicant to pay a trustee fee. Payment however, could be arranged on monthly installments up to nine months.


When a bankrupt person has excess assets or income, she/he may tells his/her friends and relatives that filing for bankruptcy was free for a trustee did ask for a fee. This is a source of misconception, because trustee fee was in fact paid from the excess assets or income.


Before filing for bankruptcy be sure that it is the best solution to solve your financial problem, otherwise, the cost of filing for bankruptcy would be more than the average of $1,300.00 for you may unnecessarily lose your other assets—an additional cost of going bankrupt. 


Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.