Surplus Income

Answer the simple questions, on The Surplus Income Calculator and fill in the numbers and the result will be displayed instantly for you.If the surplus income required appears like it would be a payment you would struggle to make, a better solution for you might be to file a Consumer Proposal instead of a bankruptcy. In a Consumer Proposal, you can potentially pay less per month, but over a longer period of time.

Always talk to a trustee first before deciding what option is best for you to deal with your debt.

Here is the science behind “Surplus Income

 The Bankruptcy and Insolvency Act (“BIA”) requires bankrupts to submit monthly statements of Income and Expense each month to their trustee

The monthly thresholds are set by the government of Canada.  Every dollar that a bankrupt family makes above the threshold is called SURPLUS INCOME

The calculation is for illustration purposes only.  Your trustee will calculate your actual payment due each month during your bankruptcy based on the actual information you provide on your monthly statements.

A review of your household income will be done at the end of month 7 (for a first time bankrupt) or month 22 (for a 2nd time bankrupt).

At the review, if you have surplus income, your bankruptcy is extended for an extra 12 months and the surplus income payable is due for each month of the bankruptcy (ie, 21 months for a 1st time bankrupt and 36 months for a repeat bankrupt).

What this basically means is that for a first time bankruptcy, the actual exact amount of surplus income you’ll have to pay (if any), wont be fully known until month #8.  Obviously, we can take a good guess at the beginning based on your average pay cheques assuming things will remain fairly constant, so it’s always best to get your payments set up right at the start based on the guess, and then review and adjust in month 8.

Here are some of the highlights of the rules:

INCOME Includes the take home pay of everyone living in the household of the bankrupt.

INCOME Is also defined as a person’s GROSS PAY minus TAXES, CPP & EI.  Any voluntary payments, eg. RRSP contributions, are added BACK and included as income.

Non – discretionary expenses (ALLOWED DEDUCTIONS) Include, Support payments, child care payments, medical bills, fines and penalties, expenses forced on you as a result of your employment.

PAYMENT: If more than one person’s income is included in the NET INCOME figure, the required payment is pro-rated to each person based on their income’s percentage of the total income.

It is important that you understand that SURPLUS INCOME PAYMENTS ARE REQUIRED BY LAW.

The BIA clearly sets out how to calculate the required payment and your trustee is required to report to the Court whether or not the payments have been made.  IF THE REQUIRED PAYMENTS ARE NOT MADE, YOU WILL NOT BE DISCHARGED FROM BANKRUPTCY.

If you have any questions on how this calculation works, or whether or not something is deductible, please don’t hesitate to contact our office.