Calculating Surplus Income Step-by-Step

How to Calculate Surplus Income in a Bankruptcy

Understanding surplus income is crucial when determining the cost of bankruptcy in Canada. A higher income generally implies larger payments, guided by the concept of Surplus Income. In this article, we will delve into the nitty-gritty of calculating surplus income step-by-step.

What is Surplus Income?

Surplus income refers to the amount of income that exceeds a certain threshold, generally known as the surplus income threshold limit. If your income surpasses this limit, you are required to pay 50% of the surplus into your bankruptcy.

Key Factors in Surplus Income Calculation

Before diving into the process of calculating surplus income, it’s essential to be aware of the key factors that influence its calculation:


  • The number of people in your household;
  • The monthly income of each individual in your household, and
  • Any allowable deductions that any household member (including yourself) is paying.


Step-by-Step Guide to Surplus Income Calculation

Calculating surplus income might seem daunting, but we will break it down into manageable steps.

Step 1: Assess Your Total Household Income

Start by comparing your total household income (total income minus allowable deductions) with the government standard for a household of your size. If your income meets or falls below this standard, you won’t have to make a surplus income payment.

However, if your total household income exceeds the government standard by more than $200, you may be required to make a surplus income payment.

Step 2: Calculate Your Surplus Income Obligation

Next, calculate your share of the excess income over the government standard. If your share is less than $200, no surplus income payment is needed.

But, if your share exceeds $200, your surplus income obligation equals 50% of your share. For example, if your share is $300, your payment would be $150, and if your share is $500, your payment would be $250.

Step 3: Average Your Surplus Income Obligation

After calculating your surplus income for the first six or seven months, find the average. You are only required to make surplus income payments if your average obligation exceeds $100. If the average falls below this line, you are exempt from payments.

As one might expect, this calculation can become complex due to factors like allowable expense deductions and varying definitions of income.

To obtain a rough estimate of your potential surplus income payment, you can use the surplus income bankruptcy calculator. However, bear in mind that this is only an approximation, and each case is unique.

For a precise calculation based on your circumstances, contact a bankruptcy trustee. They can guide you through the process and provide you with accurate results.

In summary, calculating surplus income step-by-step is a critical process in determining the cost of your bankruptcy. It takes into account your income, the number of people in your household, and your allowable deductions. While the process can seem complex, breaking it down into manageable steps makes it much more approachable.

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