Surplus Income in the Bankruptcy Process

Understanding the Role of Surplus Income in Bankruptcy Procedures

Bankruptcy proceedings are governed by the Bankruptcy & Insolvency Act in Canada. An important aspect that plays a pivotal role in these procedures is the concept of surplus income. Let’s delve into the intricacies of this concept and understand its implications in the bankruptcy process.

What is Surplus Income?

Surplus income is the amount that a bankrupt individual has to contribute to their estate monthly, based on their income. The idea behind this regulation is relatively straightforward – the higher the income, the higher the contribution. This rule ensures fairness in the system, as it requires individuals with higher income to contribute more compared to those with lower income.

How is Surplus Income Calculated?

The Office of the Superintendent of Bankruptcy sets a guideline each year that determines what a family can earn. The larger the family, the higher the earning threshold. For instance, in 2013, a single person was allowed to take home $2,006.00 each month (post-tax). However, if this individual earns $2,206.00 in a month, they are $200.00 over the threshold, hence, they are required to contribute $100 to their bankruptcy estate as a surplus income obligation.

Submission of Income Proofs

During the bankruptcy process, the bankrupt individual submits copies of their pay stubs and any other income proof to the trustee. The trustee then calculates their average income during the first six months of the bankruptcy period. This period extends to 18 months for individuals who have filed for bankruptcy for the second time.

Consequences of Surplus Income

If a person’s average surplus income obligation is less than $100.00 per month, they are eligible for an automatic discharge in either nine or 24 months, depending on whether they have filed a previous bankruptcy. However, if the surplus income obligation is more than $100 on average, the individual is required to pay surplus income for a 21 month period. This period extends to 36 months for second-time bankrupts.

Need for a Licensed Insolvency Trustee

For a detailed understanding of surplus income calculation or to determine how much surplus income would be required to pay during the bankruptcy process, it is advisable to contact a Licensed Insolvency Trustee. These professionals can provide expert guidance, whether you reside in Quebec, Calgary, or any other part of Canada.

In conclusion, the concept of surplus income plays a significant role in the bankruptcy process. It ensures that high-income earners contribute more to their estate, thereby promoting fairness. Understanding this concept can help individuals navigate the bankruptcy process with greater ease and clarity.


Remember, understanding the intricacies of surplus income and its role in bankruptcy proceedings is crucial to navigate through this process. If you find yourself overwhelmed, don’t hesitate to reach out to a licensed insolvency trustee who can guide you through this complex journey.



Bankruptcy & Insolvency Act: Governs the bankruptcy process in Canada

Surplus income: The amount that a bankrupt individual has to contribute to their estate monthly

Licensed Insolvency Trustee: Professionals who can provide expert guidance on surplus income calculation

For more information on surplus income and its role in the bankruptcy process, feel free to contact us.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.