Question: How much does it cost to go bankrupt? And why? Seems to me if your going bankrupt it’s because you have no money.
Bankruptcy Does Cost, But What’s Your Alternative?
You are correct; it does cost money to go bankrupt, for two reasons.
First, there is a small cost to cover the administration of your bankruptcy. This includes filing fees and the a small amount to cover your trustees time, staff and office expenses.
Second, although trustees do not work for the government, we are required to follow government rules, and one of the rules concerns “surplus income”. Government guidelines around how much you pay during your bankruptcy are based on a principle that says that the more money you make, the more you are required to pay while you are bankrupt. Put another way, the more you make, the more you are required to contribute to your creditors. If your income is below a certain income threshold you will not be required to make any surplus income payments.
Your question does raise an interesting point: if you have no money, how can you go bankrupt? The answer depends on why you have no money.
If you have no money because all of your money is going to pay your credit cards, bank loans, payday loans and other debts, a bankruptcy will eliminate those payments. If you do not have any surplus income and you have no assets, the cost of your bankruptcy will be fairly low and will likely be much less than you are paying today to keep ahead of your creditors.
If you have no money because you are not working, a bankruptcy may not be necessary. For many people the purpose of bankruptcy is to eliminate debt so that creditors cannot garnishee wages. If you have no wages, you cannot have your wages garnisheed, so it may make sense to wait until you are working to go bankrupt. You will have the money then to pay for your bankruptcy, and you may require protection from your creditors.
The cost of bankruptcy depends on many factors, so we suggest you meet with a licensed bankruptcy trustee for a no charge initial consultation to review the costs in your specific case before you decide to file bankruptcy.