Excess or Surplus Income

The Bankruptcy & Insolvency Act provides that in a bankruptcy certain property will vest in the trustee for the benefit of your creditors. The Act also requires that a portion of your income in bankruptcy also be paid to the bankruptcy estate each month if it exceeds certain levels. This is known as “excess” or “surplus income”.

This requirement is intended to provide for a repayment of at least a portion of your debts in those circumstances where you have the ability to make some reasonable payments. The amount of the payment is based on earnings standards set each year by The Office of the Superintendent of Bankruptcy. The standards vary by the size of the household and there are certain deductions allowed in determining what is considered to be the excess or surplus portion of income.

To understand how surplus income payments are calculated please see the surplus income calculation example we provide below.

Surplus income calculation

The 2016 standard for a single person is net monthly income of $2,089, and everything above that amount is considered as surplus income.

(By comparison, the 2016 standard for a family of four is $3,882. These standards are also increased each year for a cost of living adjustment.)

Therefore, a single person averaging $2,589 net income per month is over the standard by $500 and would normally be required to pay 50% of the surplus income to the bankruptcy estate each month; in other words, the person would be required to make a surplus income payment in the amount of $250 each month while bankrupt.

Some of the deductions allowed in determining net income are:

Minimum statutory deductions (Income tax, CPP, EI) and other mandatory deductions paid;
Child support or spousal maintenance payments that are set by court order or separation agreement;
Child care expenses;
Necessary medical expenses.

If you have a steady surplus income and/or have not made all required surplus income payments to the trustee, the length of your bankruptcy may vary and your bankruptcy discharge delayed.

For more detailed information on how much surplus income you would be required to pay during bankruptcy process, please contact a Licensed Insolvency  Trustee.