Canada Bankruptcy Assistance Program Helps Those Who Cannot Afford to File

Posted by: Krista McDonald on 01/11/2012

The Bankruptcy and Insolvency Act of Canada (BIA) provides honest debtors an opportunity to re-start their financial lives by eliminating their unsecured debt.  In a Canada bankruptcy, higher income filers may have to exchange some of what they own and some of what they earn for this chance to start over.  Lower income filers usually are responsible for no more than the court and filing costs and the fee paid to a licensed bankruptcy trustee hired to manage the bankruptcy.  What happens to those who cannot afford to file?

The Office of the Superintendent of Bankruptcy (OSB) established a Bankruptcy Assistance Program (BAP) for debtors who cannot afford the average cost of filing for a Canada bankruptcy.  If you have been searching the Internet for information about bankruptcy you may know bankruptcy costs are estimated to range from around $1,500 to $2,000.  There are some standard costs, such as the $75 filing fee and $180 for the required counseling sessions, but the commission paid to the trustee handling the bankruptcy depends on how much money passes through the bankruptcy estate.

High income filers often have to contribute income and assets into that estate but for low income filers exposure is limited.  Any Canadian citizen who has no commercial debt and has contacted two trustees who would not take their case at reduced cost can contact the OSB.  They maintain a pool of trustees who are willing to work with debtors who cannot afford the average fees.

The OSB says the program is rarely used as the vast majority of licensed bankruptcy trustees across Canada are willing to work with impoverished debtors.  A common practice among trustees is to ask for the filing and counseling session fee – a total of $255 – at the time of filing and arrange a monthly commission amount stretched out over the nine months the debtor will be in bankruptcy, subject to his or her ability to pay.

In the rare case a debtor cannot afford even that minimal amount, doing nothing is actually an option.  Creditors have legal means to collect what they are owed, but if a debtor has no assets to attach and no or very low wages to garnish, there is literally nothing they can do to you.  However, they can continue to harass you with calls and letters.  Bankruptcy is a much better option as if your situation improves the bankruptcy will have eliminated what you owe.  Doing nothing leaves you exposed until the statute of limitations for unpaid debts expires.