When you declare bankruptcy you are required to keep track of your monthly finances and report them to your Trustee each month. Any surplus income payable must be given to your Trustee who will disburse it to cover some of your debts.
The Canadian government has set net monthly income surplus income thresholds for a person or a family to maintain a reasonable standard of living in Canada. How much you will have to pay in a bankruptcy, and how long you have to pay, is determined by these rules. These bankruptcy Canada surplus income rules apply in all bankruptcies, regardless of where you live.
So what is surplus income?
In order to allow for Bankrupt Canadians to maintain a certain standard of living the government has mandated surplus income thresholds, which are set by the Office of the Superintendent of Bankruptcy. Any amount of money under the threshold you get to keep for living expenses. 50% of any money eared about the family thresholds is payable as excess income. The remaining 50% your can keep.
The thresholds are set by size of family, and are reviewed to keep up with inflation. The surplus income standards for 2022 can be seen below.
IN this case above, the debtor earns $3,500 per month, pays $145 for Child Support and medical expenses, pays the Trustee $500 in Surplus Income payments. The remainder, $ $2,855 is retained by the debtor for other monthly personal bills.
NOTE: This surplus income calculator is for information purposes only. The actual amount of surplus you would pay if you declare bankruptcy in BC, and the number of months you would be bankrupt, depend on a number of additional factors.
Why Does Surplus Income Calculation Matter?
Surplus income also affects how long your bankruptcy will last. The Canadian federal government rules say that if your surplus income each month is greater than $100 per month, then your bankruptcy will be extended by 12 months. First time bankruptcy is extended from 9 to 21 months. And a second time bankruptcy is extended from 24 to 36 months. The intent behind the extension is that you are required to continue paying into the bankruptcy for a long period of time. The better off your are, the more your creditors should benefit.
Surplus Income will also affect how much the personal bankruptcy will cost. As is seen above, the more a debtor makes, the more they have to pay in surplus income.
Extending the time to Make Surplus Income Payments
SI can have a huge impact on the overall cost and length of a bankruptcy. In fact, if you cannot make your excess income payments, you will not be discharged from bankruptcy until all the excess income payments are made. At C.E. Craig & Associates Inc we will work with you to find a bankruptcy payment plan that will work for you. If you need more time to make your required payments, we can work together to find a mediated payment plan. Working together with your trustee is one of the benefits under the Bankruptcy and Insolvency Act.
But It is essential to consider how much your monthly SI obligations will be if thinking of filing bankruptcy. A longer time to pay surplus income obligations means that your bankruptcy may have to be extended for a longer time frame in order to pay the required amount.
An alternative solution may be to file a consumer proposal where a set payment plan if fixed from the outset. Your creditors are always better off than under a consumer proposal than in a bankruptcy as you are generally re acquired to pay more over a longer period of time. However, a consumer proposal avoids a debtors requirement to submit Monthly Income and Expense Statements to the trustee and the monthly calculation of surplus income. Instead, the proposal payments can be tailored to fit your household budget.
Start with a free consultation with C.E. Craig & Associates Inc, Licensed Insolvency Trustee. We will review your financial circumstances and help you to determine the best form of debt relief for you to ensure you avoid high surplus income payments.
For a full evaluation please fill out our debt evaluation form or contact our office at admin@cecraig.com or (250) 386-8778
Where to Turn for Accurate Advice?
There are many who will provide debt advice to consumers, so it is so important to seek out reliable and accurate information. If you are ever unsure where to turn for accurate information, best to rely on the Canadian Government recommendations. https://www.canada.ca/en/services/finance/bankruptcy.html.
The Office of the Superintendent of Bankruptcy provide detailed information to Canadians seeking debt advice. Their site provides information about the Canadian insolvency system and how to find a local. Licensed Insolvency Trustee. LIT’s are the only professionals licensed in Canada to offer bankruptcy or consumer proposal services.
