Part of the cost of filing bankruptcy in Canada is the requirement to make a payment to your bankruptcy estate each month. This payment includes a base contribution to cover the costs of the administration of your bankruptcy and, depending upon your situation, an additional surplus income payment.
How is surplus income determine?
This payment, and how it is calculated, is defined under the Bankruptcy & Insolvency Act. It varies for each individual based on their family circumstances. Whether or not you will have to make surplus income payments, and how much you will have to pay, will depend upon:
- How much your family earns each month;
- How many dependents are in your household;
- The extent of eligible expenses you may be allowed to deduct.
Basically, the more you make, the more you are required to pay each month. The government allows you to earn a certain amount (the surplus income threshold); if you earn more than that amount a portion of your surplus income is contributed to your estate. If you are off sick during the month you may end up paying less; if you work overtime you may be required to pay more.
Each month that you are bankrupt you will send your trustee copies of your pay stubs and proof of any other income you have (such as child tax credits, pensions, or unemployment insurance), and based on your income the trustee calculates how much you are required to contribute to your estate.
How the calculation of surplus income works can become quite complicated, so we always recommend you talk to a trustee about your individual situation.
For starters, you can try our surplus income calculator to give you a general idea of what you might have to pay. You can enter your income information and determine what your potential surplus income payment might be if you go bankrupt.
Since surplus income affects the cost of your bankruptcy, and potentially the length of time you will be bankrupt, it is important that you discuss your potential for surplus income with a trustee, before filing for bankruptcy.
If your surplus income is more than you can afford each month, talk to us about the cost of a consumer proposal as a way to lower your monthly payments.
Every person’s potential surplus income payment is different based on their income and family circumstances. Contact a Hoyes, Michalos bankruptcy trustee to find out how surplus income would affect your bankruptcy.