What is “surplus income” in an Ontario bankruptcy filing?

We are often asked “What is the cost to go bankrupt”?

There is no easy answer to this question, as every person’s situation is different.  An initial consultation with one of our trained administrators is needed to consider all of the debtor’s individual circumstances and explore all of the options available.

One component of the cost to go bankrupt is Surplus Income.

The Superintendent of Bankruptcy has developed a formula for Trustee’s to use to calculate how much a bankrupt should contribute, or pay, into their bankruptcy estate each month.The formula is based on the bankrupt’s income, the income of other family members living in the household, and the total number of family members living in the household.

Here is a simplified example of the calculation used for a family of two:

Monthly income of bankrupt                                                      $2,000.00

Monthly income of spouse                                                         $1,000.00

Monthly household income                                                        $3,000.00

Less: Standard as set by Superintendent                                 $2,398.00

Excess of income over Standard                                              $   602.00

As the bankrupt’s share of the family income is 2/3 of the total family income the amount of surplus attributable to the bankrupt is:

(2/3’s of $602.00 = $401.33)                                                      $  401.33

1/2 of excess to be contributed per month                                $   205.67

The Standard changes as the number of family members living in the household changes.  The Standards set by the Superintendent of Bankruptcy for 2011 are: 1 person in household, $1,926.00; 2 people, $2,398.00; 3 people, $2,948.00; 4 people, $3,597.00; 5 people, $4,059.00; 6 people, $4,578.00; 7+ people, $5,097.00.

The length of time that surplus income must be paid depends on the amount of surplus and whether the debtor has been bankrupt before.

A first-time bankrupt who has surplus income is required to contribute the surplus to their bankruptcy file for a minimum of 21 months. A person who has been bankrupt on a previous occasion is required to contribute for a minimum of 36 months.

There are other rules that affect how much is to be paid and should be discussed with a Trustee in Bankruptcy in relation to surplus income, for example:

  • What if my take home pay decreases during the bankruptcy period of 21 months or 36 months?
  • Are there any expenses that would reduce my monthly surplus income requirement?
  • How do you know how much I earn on a monthly basis?

Every person’s situation is unique and different, and the best way to explore all of your possible options is to book a no charge initial consultation at our office nearest to you.

We are located in Barrie, Bracebridge, Brampton, Georgetown, Huntsville, Kirkland Lake, Midland, Milton, Mississauga, New Liskeard, North Bay, Orangeville, Orillia, Parry Sound, and Sudbury.  Help us guide you through filing a Consumer Proposal or personal Bankruptcy.  You can fill out an initial consultation form by clicking here.