How Does My Income Affect How Long I Will be Bankrupt?
Your income will impact the length of your bankruptcy if you make a salary over a certain threshold set by the government.
The threshold is based on the size of your family.
If your income falls over this threshold you will be required to pay what is known as “surplus income,” which also increases your time in bankruptcy by 12 months.
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On the other hand, if your income falls below this threshold, you will receive your discharge from bankruptcy much sooner, and you will be able to begin rebuilding your credit and saving for the future 12 months earlier than if you have surplus income.
What is Surplus Income?
The OSB (Office of the Superintendent of Bankruptcy) lists income standards that lay out the required payments that a bankrupt must make.
The required payments to complete the bankruptcy is based on your income, and whether you have surplus income or not.
Surplus income is your net income that is more than $200 over the government threshold for your family size.
If you fall into this category of net income being over the threshold, your bankruptcy will be extended by 12 months and you will be required to pay 50% of your surplus income to your Trustee for the benefit of your creditors.
How Will Surplus Income Affect How Long I Will be Bankrupt?
During the time you are in bankruptcy you must submit proof of your income each month.
At the 7th month after your bankruptcy filing, the Trustee will calculate your average income over the prior 7 months to determine if you have surplus income requirements.
If you are required to make surplus income payments it will mean you won’t receive your automatic discharge at the end of 9 months from your bankruptcy filing; your bankruptcy will be extended to 21 months.
During the 21 months you will be required to pay 50% of your surplus income to your bankruptcy estate.
If your income falls under the surplus income threshold, then you will receive your automatic discharge at 9 months (if it is your first bankruptcy) and you will be free of your unsecured debts (with some exceptions such as child support payments or alimony payments.)
First time bankrupt: No surplus income – 9 months; Surplus income – 21 months
Second time bankrupt: No surplus income – 24 months; Surplus income – 36 months
Third time bankrupt: The length of bankruptcy will be determined by a bankruptcy court for debtors with and without surplus income.
Will Other Changes in My Situation Affect My Bankruptcy?
Other changes in your finances and family life can affect your income.
If your income increases or decreases during your bankruptcy, you might fall above or below the surplus income threshold, which might be different from when you first filed bankruptcy.
If the income of your spouse changes, that could impact the length of bankruptcy, and if the number of people in your family unit changes, then your bankruptcy length could also be impacted.
The important thing to remember is that you must notify your Trustee of any changes in your circumstances during your bankruptcy.
Please see our Bankruptcy Cost Calculator, which will also tell you the length of your bankruptcy.
You can also play with the calculator to see how certain changes in income and family size could impact your bankruptcy case.
Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation
Canadian Bankruptcies
How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?
