WHAT IS SURPLUS INCOME?

Section 68 of the Bankruptcy & Insolvency Act describes surplus income and together with Directive 11R2 provides guidelines for trustees to calculate payments to the bankrupt’s estate.

The notion is that if a person making an assignment into bankruptcy has more than enough income to maintain a reasonable lifestyle for himself and her family (based on the Low Income Cut Off) then a portion of those superfluous funds ought to be paid to the estate for the benefit of estate creditors.

The whole issue of calculation can become complicated because there are processes in place to mediate calculations of the amounts payable.  The whole process is not strictly formula driven. The Office of the Superintendent of Bankruptcy provides a process of mediation.  The courts and the trustee also have input into what the final amount payable ought to be and are positioned to effectively provide another level of mediation.

Even after payments are set by a court order it is, in some cases, possible to obtain an order varying the amount payable on the original order. The whole process can be very fluid and quite confusing even for trustee’s staff.

People who have heard of “surplus income” payments would like to know before they even file for bankruptcy “exactly how much” they are going to be required to pay. But it is impossible to say without the passage of time and the changing of life events – an educated estimate can be made based on the aforementioned Section of the Act and the Directive and Rules.