What is insolvency?
In some circumstances, filing for bankruptcy may be your greatest option for getting rid of debt and starting over.
Under the Bankruptcy and Insolvency Act, Industry Australia administers the bankruptcy process legally. The trustee is appointed as your property and asset administrator when you file for bankruptcy. The trustee’s duties include winding up the property by selling all of the assets and placing the proceeds in a trust for the bankruptcy creditors.
Economic development, science, and innovation It is Australia’s responsibility to carry out the Bankruptcy and Insolvency Act. It has oversight over the trustee, the Official Receiver in Bankruptcy, the Bankruptcy Tribunal, the Superintendent of Bankruptcy, and others.
Let’s define it now and then explain who is in charge of paying for bankruptcy.
Do Bankruptcies Get Paid for by the Government?
Even though you might have more debt than you can manage, bankruptcy is regrettably not free. You might be wondering who actually pays for bankruptcy as you seek financial independence by declaring bankruptcy. Is the cost covered by the government? Do taxpayers foot the bill? Do you pay for it yourself? Importantly, how much does it cost?
We must first define the sorts of costs associated with bankruptcy before we can determine who actually pays for it.
What Fees and Payments are Associated with Bankruptcy?
There is initially no fee associated with declaring bankruptcy. Free first advice is provided by a Licensed Insolvency Trustee. The Trustee will assess your financial situation and provide a free recommendation regarding declaring bankruptcy or a consumer proposal.
You will begin to pay expenses if you choose to proceed and file based on the Trustee’s advice.
There are filing fees and other ancillary expenditures associated with bankruptcy filing. Depending on whether you engage a lawyer and if you qualify for a court filing fee waiver, your out-of-pocket expenses may range substantially.
The following are examples of out-of-pocket bankruptcy costs:
- filing fee: This will be decided at the time of filing.
- Cost of credit counselling: Before declaring bankruptcy, you must complete credit counselling. Services for credit counselling are often affordable. If you can’t afford credit counselling, let the organisation know what’s going on and ask if the charge may be waived for you.
- Course on debtor education You will be obliged to take a debtor education course after filing for bankruptcy. The majority of debtor education programmes may be inexpensive. Once more, if you are unable to pay for this, you might be able to negotiate to have the fee reduced or eliminated entirely.
Bankruptcy’s overall financial costs
- Base contribution cost
The first bankruptcy price includes the Licensed Insolvency Trustee’s salary as well as administrative costs and fees. The base contribution cost is that amount. The minimum filing fee is $1,800, which is split into 9 payments of $200 each.
The base contribution cost is typically $1,800, however it might occasionally be more expensive.
- Extra income expense
Only if you have more than $200 in surplus income do you incur the second expense of bankruptcy. A specific level of money is really all you need to make it through the bankruptcy process, according to the Canadian government.
The surplus income cap is established annually by the Office of the Superintendent of Bankruptcy. Another consideration is family size; a bigger family has a greater barrier for extra income. Basically, having a larger family allows you to keep more of your money.
You’ll be informed of the amount you must pay by your Licensed Insolvency Trustee. The bankruptcy trustee will frequently request tax returns and pay stubs to confirm your income at the time of filing.
- Asset price
The value of any assets you may have will determine the total cost of filing for bankruptcy. Any property that is not excluded from liquidation will be sold during your bankruptcy. This implies that the trustee supervises the sale of these assets and subsequently pays your creditors with the proceeds of the sale.
Before deciding to file for bankruptcy, you should exhaust all alternative avenues of relief if you have assets that you don’t want to see liquidated, especially high-value assets.
Personal bankruptcy’s expenses
Financial charges are not the only expenses linked to declaring bankruptcy. You will also incur the personal expenses listed below.
- Costs time
The process of filing for bankruptcy requires time, and there are specific activities you must carry out before you can proceed. Regularly provide documents and other supporting materials to your trustee.
- Credit fee
Depending on the province or territory where you reside, bankruptcy is reported on your TransUnion credit report for six to seven years from the date your debts are discharged and for six years after it is noted on your Equifax credit report.
While you are filing for bankruptcy, you won’t be allowed to get any new lines of credit. Rebuilding your credit will be challenging after your discharge. Either you won’t be accepted or your interest rates will increase. Higher borrowing costs result from this.
- Professionally priced
While you are filing for bankruptcy, you are not eligible to be a company director.
Who Pays for Bankruptcies Actually?
Who pays for bankruptcies now that you are aware of the expenses—from out-of-pocket to financial and personal.
The court filing fee, which helps to partially finance the court system and other related expenses associated with bankruptcy proceedings, is normally paid by the individual who files for bankruptcy. Your Licensed Insolvency Trustee may request to have the charge waived in certain circumstances based on your income. The Bankruptcy Court will then pick up the bill by paying for all associated costs to guarantee the individual obtains all necessary services to properly conclude their bankruptcy case. Fee waivers are only given when it is obvious that the person simply cannot afford to pay the filing fee even after the lawsuit has been filed and the obligation is no longer due, as doing so places a tremendous strain on the courts.
You may frequently get a waiver for the credit counselling and debtor education courses as well if your court filing cost is waived. You will be responsible for paying the attorney if you want to retain him or her to assist you with your case. However, keep in mind that if you can’t afford to retain an attorney, you can file for bankruptcy on your own. Click here to learn more.