2016 Surplus Income Standards

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2016 Surplus Income Standards

On February 23, 2016 the Superintendent of Bankruptcy recently released the new standards for the calculation of surplus income for bankrupt individuals via Directive No.11R2-2016.

2016 Standards
2016 Standards

When an individual files for personal bankruptcy the trustee will calculate whether or not he will be required to make surplus income payments based on his net household income.

The Government of Canada has 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.

Under the surplus income rules, the monthly surplus income payment is calculated using the following formula:

Net Income ( - )  government established threshold  ( = )  surplus  ( ÷ )  2 (  = )  surplus income payment

For example: John Dough lives alone and his take-home pay is $2,484 per month.  Using the above formula, the monthly surplus income payment that he is required to make would be:

$2,485  -  $2,089 (threshold for single person)  =  $396  ÷  2  =  $198

In this example John Dough is required to pay $198 in surplus income payments for each month that he is bankrupt.  He will submit monthly income and expense reports to his bankruptcy trustee and they will calculate his surplus income payment.  If John’s pay increases, he will pay more and if his pay decreases, he will pay less.

If surplus income each month is greater than $200 (meaning that you are paying more than $100 each month in surplus income payments), a first-time bankruptcy is automatically extended to 21 months. A second bankruptcy is extended to 36 months.

If this was John’s first bankruptcy he would be required to pay $198 for a period of 21 months.  If John had been bankrupt before then he would have to make 36 payments of $198.

Powell Associates Ltd. is a Licensed Insolvency Trustee (LIT) 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, FrederictonCharlottetown or Dartmouth - it's your choice.