Greater Toronto is an expensive place to live. Sometimes it’s too expensive to even go bankrupt.
No, we’re not pulling your leg. With court costs, filing fees and trustee services, it can cost between $1,500 and $2,500 to go bankrupt. The financial plight of some people can be so severe that it may seem on the face of things that they cannot afford to go bankrupt.
To address this situation, in 1993, the Federal Government created a special program, called the Bankruptcy Assistance Program. Under BAP, a person unable to afford the normal costs of filing a bankruptcy is able to secure the services of a trustee – the first necessary step in going bankrupt.
More on the process later. To be eligible for BAP, a person must not:
- Be in prison.
- Be involved in a commercial activity. Business filings can be complicated, costly and time consuming, so they are not included under BAP.
- Have what is called “surplus income.” This is an amount of money you earn that is over a pre-defined limit. (What constitutes the limit is complicated and must be explained by a trustee such as Richard Killen & Associates.)
If none of these things apply to you, how can you take advantage of BAP?
Well, you start by contacting the Office of the Superintendent of Bankruptcy (OSB). Tell them your problem and they will send you a list of participating Licensed Insolvency Trustees. Not every trustee participates in this voluntary program.
The idea is, you are not eligible for BAP until you have done your best to secure the services of a trustee the normal way. But the truth is, the program is often not needed. Bankruptcy trustees are used to dealing with people in financial straits. Many trustees, such as Richard Killen & Associates, are prepared to work with people and come to an arrangement that suits their circumstances and means.
In any event, under OSB, you visit a trustee on the list given you. If, after the normal consultation (most trustees offer this for free), you cannot reach an arrangement to handle your bankruptcy, you ask the trustee to sign a paper and put down the reason why you couldn’t reach an arrangement.
Then you have to try the same thing with another trustee on the list. If, again, you cannot reach an arrangement with that trustee and they sign the same paper as the first, you can go back to the government and then, and only then, will they will find you a third trustee under BAP. This third trustee is duty bound to do your bankruptcy for “costs” – a term that means different things to different people, but will vary in price from $400 to $800.
Many people misunderstand the BAP system. And explanations from the government often add to the confusion. A lot of people think that all they have to do is go to two Licensed Insolvency Trustees, get the form signed and then go back to the government to get a free – or low-cost – bankruptcy. They don’t understand that they are supposed to try to make a deal with the first trustee. If they can’t, then they are supposed to try to make a deal with the second. If they still can’t, then the government will appoint a third.
Depending on who you see first, you may find that you don’t even need to see a second trustee, because the first trustee may accept your financial limitations and give you the same rate they would if the government had appointed them through BAP. We at Richard Killen & Associates do this all the time.
If you feel your financial circumstances are particularly dire and wonder whether you qualify for reduced fees in a bankruptcy, come to Richard Killen & Associates for a free consultation. We will make sure you understand all your options and will help you find a solution that best suits your particular circumstances. Lack of financial resources shouldn’t bar you from getting the help you need.