Will I Lose My Canada Child Benefit (CCB) If I File For Bankruptcy?

27 September 2016

Will I Lose My Canada Child Benefit If File For Bankruptcy?

BenefitsThe short answer is no, you will not lose your Canada Child Benefit (CCB) if you decide to file for bankruptcy protection under the Bankruptcy And Insolvency Act (BIA).

The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help them with the cost of raising children under 18 years of age.  The CCB might include the child disability benefit and any related provincial and territorial programs.

While your CCB will not be affected by bankruptcy, your Licensed Insolvency Trustee will require that you include the CCB when calculating and reporting your household income.  These monthly reports will determine whether or not you are in “surplus income”, which in turn will impact how long you are in bankruptcy and how much you will be required to pay.

Under the BIA, a person who files for bankruptcy will be required to pay additional funds into his bankruptcy estate based on guidelines established by the Government of Canada.  These guidelines set net monthly income thresholds for a person or family to maintain a minimal standard of living in Canada.  Every dollar that a bankrupt family makes above this level is subject to a surplus income payment of 50% while a person remains bankrupt.  All forms of household income, including the Canada Child Benefit (CCB), are included in this calculation.

For example, the 2016 guideline for a household of two is $2,601.  A single parent with employment earnings of $2,500 with a CCB of $550 will have total household income of $3,050.   The calculation for surplus income will be as follows:

Total household income of $3,050 (less) guideline of $2,601 = surplus income of $449.  The bankrupt’s share of the household income is 82% ($2,500/$3,050) therefore his surplus income will be $368 (82% of $449).  He will be required to pay $184 (half of $368) into his bankruptcy estate for 21 months, if he is a first time bankrupt, or 36 months if he has had a prior bankruptcy.

For separated or divorced spouses, the child tax will be considered part of the household income for the parent who has primary custody of any children.

Powell Associates Ltd. is a Licensed Insolvency Trustee focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses.  We offer free consultations to review your personal financial situation and practical debt resolution options.  Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton or Charlottetown – it’s your choice.