David Sklar & Associates Inc.

Consumer Proposal & Bankruptcy Trustees
Serving the Greater Toronto Area

Surplus Income in the Bankruptcy Process

Perhaps one of the most misunderstood concepts of Bankruptcy in Canada is Surplus Income.

Surplus Income levels are set by the Superintendent of Bankruptcy and determine if an individual in Bankruptcy earns enough money to be required to make surplus income payments into their Bankruptcy Estate. Income is based on the total household income. If Surplus Income exists, the length of the Bankruptcy will be increased to 21 months from 9 months for first-time bankrupts and from 24 months to 36 months for second-time bankrupts.

The following are the Surplus Income levels as set by the Superintendent of Bankruptcy in March 2011 as found on the official Office of the Superintendent of Bankruptcy Canada’s website:

The size and total income of your family has an impact on determining if Surplus Income exists. For example in the above chart we can see that a family of two who earn a combined $2326 (after tax income and after ‘non-discretionary’ expenses per month) does not, according to the Superintendent of Bankruptcy, have Surplus Income. However, if we are looking at a family of one earning the same amount ($2386 after tax income and after ‘non-discretionary’ expenses per month) then Surplus Income payments would be required and the length of the Bankruptcy would be set at 21 months (for a first-time bankrupt).

Note: changes in income during a Bankruptcy, can change the status of Surplus Income payments and the length of the Bankruptcy.

According to the Bankruptcy and Insolvency Act, there are ‘non-discretionary’ expenses that can be deducted from the family’s total monthly income before Surplus Income is determined. Some of the ‘non-discretionary’ expenses can include:

• Legally mandated support payments to children or spouses
• Child care expenses
• Some medical expenses
• Court-imposed fines or penalties
• Some employment expenses

Although the idea of Surplus Income is a straight forward concept – applying the rules and guidelines for it can be complex. It is recommended that you discuss this and all your Bankruptcy matters with a Licensed Bankruptcy Trustee (such as David Sklar & Associates Inc. in the Greater Toronto Area).