Why Surplus Income Is An Important Part Of Your Debt Recovery

Bankruptcy is not a rare option for many Canadians seeking a way out of their financial hell.

Did you know that two in every thousand people in the country filed for bankruptcy in 2019 alone?

Filing for bankruptcy is a big decision, and there are lots of variables and factors to consider before going ahead with it.

One point to consider is your “surplus income” – the extra cash you’ve got after paying your bankruptcy payments and household expenses.

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The government’s definition of surplus income

When you file for bankruptcy, your personal and family situation gets taken into account.

A bankrupt person must disclose details of all their earnings and expenses and that of their family unit to their LIT (licensed insolvency trustee).

What that means for you is the need to disclose all income and bills from both yourself and other adult members of your household.

With that in mind, what does the government of Canada define as surplus income?

In a nutshell, the Office of the Superintendent of Bankruptcy Canada defines surplus income as $200 or more above the household threshold.

The income limit will depend on how many people are in your family.

The limit goes up if two or more immediate family members are living in your home.

What will happen to any surplus income?

The answer is, “it depends.”

Any surplus monthly income up to $199.99 will not affect your bankruptcy terms.

That means you can keep that extra income because it doesn’t get taken into consideration when calculating what you must pay back to your creditors.

What might happen if you earn precisely $200 or more each month above your threshold limit?

In those cases, your LIT will require you to pay 50% of that extra income into your bankruptcy.

How else can surplus income affect bankruptcy?

So far, you know that surplus income can potentially mean you pay extra money each month as part of your bankruptcy terms.

But, there are other implications to consider.

The main one is that the length of your bankruptcy could get extended.

When the government talks about surplus income, they aren’t just talking about your regular salary payments.

Other money paid to you can potentially trigger surplus income scenarios, such as:


  • Bonuses;
  • Child tax credits and child support;
  • Pension income;
  • One-off payments.


Another way that surplus income can affect your bankruptcy is if you fail to disclose it.

For example, if you quit your job and get a new one elsewhere that pays a higher salary.

In those cases, failure to disclose surplus income could mean your debts don’t get discharged.

Am I likely to have a surplus income?

Contact us today on (877) 879-4770 to discuss filing for bankruptcy.

Our expert team comprises licensed trustees that will help you determine your income and expenditure, and go through the filing process with you.

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