Updated: April 2025  |  bremo.io financial guides

How Much Does Bankruptcy Cost in Canada?

One of the biggest misconceptions about personal bankruptcy in Canada is that it's free or nearly free. In reality, filing for bankruptcy involves several types of costs — some fixed by the federal government, some variable based on your income. Understanding these costs is essential for comparing bankruptcy to other debt relief options like a consumer proposal.

The Base Filing Fee

The federal government sets a minimum fee that must be paid to file for bankruptcy. As of 2025, the base amount is approximately $1,800 for a summary administration bankruptcy (the most common type for individuals). This is typically paid in monthly installments to the Licensed Insolvency Trustee over the bankruptcy period.

This base fee covers the trustee's administration costs and the government levy paid to the Office of the Superintendent of Bankruptcy.

Surplus Income Payments

Surplus income is the biggest variable cost in a Canadian bankruptcy — and the one that surprises most people.

The Office of the Superintendent of Bankruptcy sets income thresholds based on family size each year. If your net monthly income exceeds the applicable threshold, you must pay 50% of the excess to the trustee each month. This continues for the full bankruptcy period.

If you have surplus income, your bankruptcy period extends from 9 months to 21 months. The total surplus income payments can range from a few thousand to tens of thousands of dollars depending on how much you earn above the threshold.

Summary of Potential Costs

• Base administration fee: ~$1,800 (paid over the bankruptcy period)
• Surplus income: 50% of monthly surplus × number of months (0 if no surplus)
• Non-exempt asset proceeds: If you have non-exempt assets above provincial limits, they are liquidated and proceeds go to creditors
• Tax refund: Any income tax refund for the year of bankruptcy (and prior years) goes to the trustee

What the Trustee Earns

The LIT's compensation is regulated by the federal government — they do not charge you separately. The trustee is paid from the funds collected (base fee, surplus income, and asset proceeds). Their fee comes out of the estate rather than being billed to you on top of everything else.

Comparing Costs: Bankruptcy vs. Consumer Proposal

For higher-income Canadians, bankruptcy can actually cost more than a consumer proposal. Consider:

• A person earning $4,000/month net with a $2,355 threshold has $1,645 in surplus. They pay $822.50/month for 21 months = approximately $17,000 in surplus income payments plus the base fee.
• A consumer proposal for the same person might offer to pay $400/month for 60 months = $24,000. But they keep their tax refund, keep all assets, and the credit damage is less severe.

There is no universal "cheaper" option — the right answer depends on your income, assets, and debt level. A LIT can run both scenarios for you.

Hidden Costs of Bankruptcy

Beyond the direct fees, bankruptcy carries indirect costs:

• Credit impact: R9 rating for 6–7 years means higher interest rates or inability to borrow when you need to.
• Rental housing: Some landlords conduct credit checks; a recent bankruptcy may affect your ability to rent.
• Employment: Jobs in finance, government, or security may require credit screening.
• Bonding: Some professional licences or bonding requirements may be affected.

What If You Cannot Afford the Base Fee?

LITs have flexibility in payment arrangements. Some will allow the base fee to be paid in very small monthly installments throughout the bankruptcy period. If you have absolutely no income, the trustee may still file the bankruptcy and recover fees from any assets or tax refunds. Discuss your situation openly — initial consultations are always free.

Getting an Accurate Cost Estimate

The only way to get an accurate picture of what bankruptcy would cost in your specific situation is to meet with a Licensed Insolvency Trustee. Initial consultations are free and confidential. The LIT will calculate your surplus income, identify your non-exempt assets, and give you a realistic total cost estimate — then compare it to alternatives like a consumer proposal.