Surplus Income When Bankrupt in Canada and Paying Spousal and Child Support
When you file bankruptcy in Canada, you might be required to pay surplus income payments if you earn over a certain amount.
Surplus income limits depend on the size of your family.
For example, in 2020, the limit for a family unit of one is $2,243 per month, whereas it is $4,728 for a family of five.
Half of the income over these amounts needs to be paid as surplus income payments.
The limits change each year to account for inflation.
If you pay spousal or child support, you might wonder about the size of your family.
Do your children count as dependents, even if they don’t live with you?
Is the calculation of your income affected by the payments that you make?
If you have an ex-spouse and children who are no longer living with you, they are not counted as dependents for the purpose of calculating surplus income payments.
However, the spousal and child support payments that you make do make a difference.
These payments are taken into account when calculating your income.
These are used to reduce your net income, which might mean that you don’t need to make surplus income payments or that your payments are lower.
For example, if you are a single person and your income less the payments that you make for child support is below $2,243 per month (in 2020), you won’t need to make surplus income payments.
When you file bankruptcy, you are required to submit proof of your income each month.
You will also need to submit proof that you have paid your spousal and child support payments, unless it is taken directly from your paycheck.
You can provide proof of payment such as a receipt from your ex-spouse that confirms that you have made the payments.
Your trustee will calculate your net income each month based on the information that you provide.
This means that if your income or payments fluctuate, you could pay surplus income payments some months but not others.
You will need to submit proof of the payments you make each month if you want them to be deducted from your income.
Bankruptcy could be the right option for you if you are having problems dealing with your debts.
However, you will still be required to pay spousal payments and child support if you file for bankruptcy.
If you have any debts relating to these payments, they will not be discharged when you file bankruptcy.
It’s important to be aware of how bankruptcy works and which debts are discharged when you file bankruptcy.
Bankruptcy Canada helps you with all things related to filing bankruptcy in Canada.
We provide educational resources to help you learn about bankruptcy, how it works, and whether it might be the right choice for you.
We connect you with Licensed Insolvency Trustees, who will offer you advice and help you to explore your options for dealing with debt.