What is Surplus Income?

When you file for bankruptcy, and depending upon your level of income, you will be required to make payments to your trustee during your bankruptcy period.  When your income is over and above what the government says you need to maintain a reasonable standard of living, as set out by the Office of the Superintendent of Bankruptcy (OSB), these payments are called surplus income payments.

How are surplus income payments set?

  • Each year, the OSB, sets a net monthly amount it deems is a reasonable level of income. This amount is based on the low income cutoffs released by Statistics Canada, and it will vary according to the number of people in your family (the more people you’re supporting, the higher your allowable income).
  • Special needs such as medical expenses and family support payments are taken into consideration, and adjustments are made.
  • If your spouse works, his/her income is included in the calculations.
  • If your monthly income is irregular (i.e. you’re a contractor or dependent on commissions), your trustee will help you figure out an average.

How will the payments affect me?

  • Each month you’re in bankruptcy, you’ll need to give proof of income (usually your paystub) to your trustee.
  • If your surplus income payments are less than $200 a month, you’ll probably be eligible for discharge (assuming it’s your first bankruptcy) in 9 months; if your payments are more than that, expect to remain in bankruptcy — and to make the payments — for an additional year (21 months in total).
  • If your surplus income payments will be significant, you might consider filing a consumer proposal instead of filing for bankruptcy. Your trustee will be able to advise you on this and other options.

To find out more about how bankruptcy might affect you (or what your other options might be), speak with one of our insolvency experts today about a free, no-obligation consultation: in Ottawa call 613-237-5555; out of town, call toll-free 1-800-517-9926 or book online.

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