You are required to pay surplus income payments after filing bankruptcy if you earn over the limit that is set.
This limit changes each year and is also based on how many people are in your family.
You can keep a portion of your income, but half of what you earn over the surplus income limit needs to be paid to your trustee.
The payments that you make are distributed to your creditors to help pay off your debts.
The surplus income limits change each year to keep up with inflation and are set by the Office of the Superintendent of Bankruptcy.
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The surplus income limits for 2020 can be found in the table below:
|Family Size||Surplus Income Limit (Per Month)|
The amount that you will pay is calculated on a month-by-month basis.
Each month you are required to submit proof of income to your trustee, such as paystubs.
Along with proof of income, you will also provide evidence of allowable expenses, which will be used to reduce your net income to calculate whether you will need to pay surplus income payments.
These expenses include child care or child support payments and medical expenses, among other things.
Your surplus income is the amount that your net income exceeds the limit for your family size.
For example, if you are a single person with a net income of $3,000 in a month, your surplus income will be $757 ($3,000 – $2,243).
Half of your surplus income must be paid to your trustee each month, along with your other bankruptcy payments.
Surplus income payments can also affect the length of your bankruptcy.
If it is your first bankruptcy, your trustee will average your income after seven months.
If your average surplus income is more than $200 per month, your bankruptcy will be extended from nine to 21 months.
You will need to continue to pay surplus income payments each month.
If your average surplus income is under $200 per month, you can be discharged after nine months.
There are some other factors that affect the calculation of how much you pay and how long your bankruptcy lasts.
If you have been bankrupt before, your bankruptcy will be longer.
If you are married and your spouse is not bankrupt and earns income, the calculation becomes more complicated.
A Licensed Insolvency Trustee can take care of this calculation and let you know how much you might pay each month by taking a look at your finances.
Consumer proposals offer an alternative to bankruptcy, which can be a good option if you expect that you will be earning over the surplus income limit.
It can help you to manage your debts and avoid bankruptcy while paying off some of what you owe.
Trustees can also help you with filing a consumer proposal and can help you to decide whether it’s right for you.
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