What is surplus income as it relates to bankruptcy? This handy guide will help you to understand and determine the surplus income payments you may be required to make after declaring bankruptcy.

1. Surplus Income
Our Step-by-Step Guide to
Determining Surplus Income
www.hoyes.com

2. Table of Contents
What is Surplus Income?
The Formula for Surplus Income
The Rules of Surplus Income
Calculating your Surplus Income
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3. The government has set net monthly
income thresholds for a person or
family to maintain a reasonable
standard of living in Canada.
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What is Surplus Income?
Every dollar that a bankrupt family makes above this level
is called surplus income, and the bankrupt is required to
pay 50% of this surplus income while they are bankrupt. If a
bankrupt has surplus income averaging more than $200 per
month, their bankruptcy will be extended for 12 months.

4. The Formula for Surplus Income
The following formula is used to
determine the monthly surplus payment
that a bankrupt is required to pay, under
surplus income rules:
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NET INCOME includes all income, after deductions, of everyone living in
the household of the bankrupt, net of certain allowable deductions

5. Net Income is defined as a person’s GROSS PAY
minus taxes, CPP & EI. Any voluntary
payments (eg RRSP contributions) are added
back. Certain expenses are then deducted
from your NET INCOME before the surplus
calculation.
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The Formula for Surplus Income
Deductions include: support payments,
child care payments, medical bills, fines
and penalties, any other employment
expenses that you normally deduct when
preparing your income taxes.

6. The Formula for Surplus Income
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The threshold is set by the Office of the
Superintendent of Bankruptcy and is
updated every year. It is based on the
number of persons living with the
bankrupt.
Your required payment will be 50% of your
surplus income.
Number of persons 1 2 3 4 5 6 7
Threshold 2013 $2,006 $2,497 $3,070 $3,728 $4,228 $4,768 $5,309

7. The Rules of Surplus Income
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Surplus Income Payments are required by law:
• The Bankruptcy and Insolvency Act clearly sets out how to
calculate the required payment.
• Your Trustee is required to report to the Court whether or
not those payments have been made.
• If the required payments are not made, you will not be
discharged from bankruptcy.
• If your average surplus income is greater than $200 per
month, your bankruptcy will be extended for an
additional year.

8. Calculating Your Surplus Income
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What are your sources of income?
Personal take home pay per month (ADD BACK voluntary deductions
such as RRSPs and RESPs)
+
Spouses take home pay per month (ADD BACK voluntary deductions)
+
Child tax benefit
+
Social Assistance
+
Pension income
+
Other income
= SUBTOTAL A

9. Calculating Your Surplus Income
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What are the deductions from your income?
Support payments
+
Child care expenses
+
Medical expenses
+
Court fines
+
Other income
= SUBTOTAL B

10. Calculating Your Surplus Income
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SUBTOTAL A - SUBTOTAL B = Net Income
Once you determine your monthly net income, subtract the
threshold. The remaining number is your surplus income. 50% of your
surplus income is the total surplus payment required per month.
Example:
NET INCOME – THRESHOLD = SURPLUS X 50% = PAYMENT
$2,606 - $2,006 = $600 X .5 = $300

11. Some Important Considerations
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• If you receive a bonus or earn more income, your surplus income
will go up, increasing the cost of your bankruptcy.
• If you are filing jointly with your spouse, your payments are shared
pro-rata based on your income.
• Allowable deductions and what is deemed income can be
complicated.
If you are considering filing bankruptcy, you should estimate your
surplus income before you file and talk to your trustee about your
options. If you think you will have a large surplus income payment,
you may want to consider a consumer proposal as an alternative.

12. Calculate your
surplus income
payment.
Try our Surplus Income Calculator
Or give us a call at
310-PLAN