Bankruptcy Ontario: Surplus Income Calculation

Understanding How Surplus Income Payments are Calculated in an Ontario Bankruptcy

Bankruptcy is a legal process that provides relief to individuals struggling with unmanageable debt. However, in Ontario, the calculation of surplus income during bankruptcy is critical. This article will delve into the intricacies of the Bankruptcy Ontario Surplus Income Calculation, offering practical examples and providing insights into its impact on debtors.

Bankruptcy Ontario Surplus Income CalculationWhat is Surplus Income?

Surplus income refers to the portion of a bankrupt individual or family’s income that exceeds the prescribed guidelines set by the federal government. This surplus is calculated after considering net family income and standard living expenses.

Federal Guidelines for Surplus Income

The federal government provides guidelines to aid in determining if an individual or family has surplus income. These guidelines are based on net family income, which is the income left after considering several factors.

Factors Considered in Net Family Income

Net family income takes into account:

  1. Income taxes.
  2. Payroll deductions.
  3. Medical expenses.
  4. Alimony or child support.
  5. Income-related expenses (e.g., child care).

However, actual expenses such as rent, mortgage payments, food, and utilities are typically not considered. For self-employed individuals, necessary business expenses are also deducted.

Guideline Amounts

The guideline amounts for surplus income calculation vary based on the number of family members. For instance, in 2023, the guideline amounts were as follows:

No. in Family Net Family Income
1 $2,543
2 $3,165
3 $3,891
4 $4,725
5 $5,359
6 $6,044

Calculation Examples

To better understand how the Bankruptcy Ontario Surplus Income Calculation works, let’s consider two examples:

Example 1 – Single Individual

A single individual earning $2,900 net per month would exceed the guideline for a family of one by $357 ($2,900 – $2,543). The individual would be required to pay half of any surplus income, amounting to $178.50 per month during the bankruptcy period.

Example 2 – Couple with One Child

In a family where the wife earns $2,500 a month, the husband earns $2,000 per month, and they have one child. Only the wife is filing bankruptcy. The total family income of $4,500 exceeds the guideline for a family of three by $609 ($4,500 – $3,891). The required surplus payment would be $304.50 if both were filing bankruptcy. However, as only the wife is filing, the payment would be pro-rated based on her total percentage of family income, resulting in a payment of $221.

Impact on the Discharge of a Bankrupt

The amount of surplus income affects how long the bankruptcy will last:

  • 1st time bankrupt – no surplus income obligation payable – eligible for automatic discharge at 9 months.
  • 1st time bankrupt – surplus income obligation payable of $100/month or more – eligible for automatic discharge after payment of surplus for a period of 21 months.
  • 2nd time bankrupt – no surplus income obligation payable – eligible for automatic discharge at 24 months.
  • 2nd time bankrupt – surplus income obligation payable of $100/month or more – eligible for automatic discharge after payment of surplus for a period of 36 months.

Monthly Statements and Material Changes

Bankrupt individuals are required to file monthly income and expense statements with the Trustee. If there is a significant change in income, an application for mediation will be required to amend the payment obligation.

Mediation Process

If the individual filing bankruptcy and the trustee cannot agree on the payment amount, a mediation process is available. If necessary, an application can be made to the court.

Consumer Proposals and Orderly Payment of Debts

The surplus income guidelines and calculations are often used as a basis for payments in Consumer Proposals or Orderly Payment of Debts.


The calculation of surplus income can be complex. It is advised to discuss your situation in detail with an Insolvency Professional.

Surplus Income Calculator

To estimate surplus income payments, you can use the Surplus Income Calculator. This tool allows you to subtract the guideline amount allowed for living expenses from your net family income.

For example, in 2023, the guideline amount for a family of three was $3,891. A family with a monthly income of $4,200 would have $309 in surplus income. Therefore, the surplus income payment would be half of this amount, or $154.75.

Understanding the Bankruptcy Ontario Surplus Income Calculation is essential for those considering bankruptcy. It helps to determine the amount they would need to contribute towards their debts and how long the bankruptcy period would last. It is always advisable to consult with a professional to navigate this complex process.

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