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What Do I Need To Know About Surplus Income in Bankruptcy?

Surplus Income in Bankruptcy

Surplus income is the name given to the calculation a Trustee must use to determine the monthly payments that a bankrupt must make.

If the bankrupt’s income is over a certain level set by the government calculation, then they must make the required surplus income payments.

Our Bankruptcy Calculator will give you the exact payments required and how long you will be in bankruptcy.

The Trustee will make the surplus income calculation at the start of the bankruptcy, and again at the 7th month of the bankruptcy.

The calculation for surplus income payments is not complicated, although there are certain things that you must know about surplus income in a bankruptcy.

The calculation is based on the Surplus Income Threshold, which is the amount of income that the government has determined a person needs for a reasonable standard of living.

The government has set an income threshold for families that are made up of 1 to 7 or more people.

The more people in the bankrupt’s household, the higher their surplus income threshold.

Debtors with significant surplus income requirements might want to consider a consumer proposal.

How Does The Surplus Income Calculation Work?

The calculation is based on the bankrupt’s income and the size of their household. The bankrupt’s spouse can choose to disclose their income or they can refuse to disclose their income.

If the spouse does not disclose their income to the Trustee, they will not be included in the number of family members in the household.

If the bankrupt’s income is $200 over the surplus income threshold they will be responsible for paying surplus income payments to their bankruptcy estate.

When a bankrupt must pay surplus income they will pay 50% of their income over the threshold to their Trustee.

The Trustee will distribute these funds to the creditors in the bankruptcy.

What If I Do Not Agree With My Trustee’s Surplus Income Calculations?

There is a mediation process in place that you and/or your Trustee can request.

If you do not agree with the surplus income calculation you Trustee makes for you, then your Trustee will request mediation to resolve the dispute.

While the mediator will not be able to force an agreement, working with a mediator can help you and your Trustee reach an agreement in relation to your surplus income payments.

Cannot Afford To Pay the Required Surplus Income Payments By the Required Time

It is important to remember that if you are unable to make your surplus income payments, you may ask for an extension of the time to make these payments.

Under the bankruptcy law, it is assumed that you will make the required surplus income payments every month.

Sometimes this is not possible, and you are able to negotiate payment terms with your Trustee.

Usually, a bankrupt will ask to have an additional 12 or 24 months to make the surplus income payments.

You will remain bankrupt until all of the required surplus income payments have been made.

The payment agreement you reach with your Trustee will be sent to a bankruptcy mediator.

The only reason this agreement is sent to the mediator, however, is so that the deal is recorded and becomes legally binding.

Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation

Call 877-879-4770


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