Surplus income

“Surplus income” is a specific concept within the context of bankruptcy, under the Bankruptcy and Insolvency Act (BIA). It refers to the amount of money that an individual who has declared bankruptcy is required to contribute to their creditors, based on their monthly income. Here is how it works:

  1. Calculation of Surplus Income: The Canadian government sets income standards based on household size. If the income of the individual declaring bankruptcy exceeds this threshold, a portion of that “surplus income” must be paid to the creditors.
  2. Contribution: Generally, the bankrupt individual is required to pay half of the amount by which their income exceeds the set standards. For instance, if the monthly income surpasses the established standard for the household size by $400, they would be obligated to contribute $200 per month to the bankruptcy.
  3. Duration of Bankruptcy: If a person has surplus income, the duration of the bankruptcy will be extended. For a 1st-time bankruptcy, this means that the bankruptcy can last 21 months instead of 9 months. For a 2e bankruptcy, it will last 36 months instead of 24 months.
  4. Review: The bankrupt individual’s income is reviewed regularly during the bankruptcy to ensure that contributions are adjusted if necessary.

The surplus income concept is in place to ensure that those declaring bankruptcy and have the ability to pay contribute fairly towards repaying their creditors. You should consult with a Licensed insolvency trustee to understand how this would apply to your specific financial situation.