Understanding Surplus Income Limits in a Bankruptcy

The Office of the Superintendent of Bankruptcy has set guidelines as to what they feel is necessary to cover reasonable living expenses in a bankruptcy.  If income exceeds the threshold, then payment of 50% of the excess must be paid to the trustee as “surplus income payments”.

The purpose of the guideline is to ensure application across all personal bankruptcies on an equal basis.  The guideline anticipates that changes may have to be made in lifestyle to be able to afford the surplus income payment which is a tradeoff for discharging your debt.

The guideline is standard across Canada and based on your income, family size and certain non-discretionary expenses (spousal and child support payments per a Court order or written agreement, medical costs not covered, and childcare are the most common).  The actual funds left over at the end of the month do not impact on the calculation.

For a family of 1, the directive amount is currently $2,666.00.  Net take home income from all sources (employment, Ontario Works, support, etc.) less non-discretionary expenses is compared to the directive.  If the net exceeds the directive, then surplus income payments of 50% must be paid to the trustee and the bankruptcy will be extended by a further 12 months.  For example:

If you are seeking help for overwhelming debt, don’t let the surplus income requirement scare you from reaching out to a Licensed Insolvency Trustee.  Our trustees will review the above and explore all solutions, including a consumer proposal, to come up with a plan that works for you.