Surplus Income

October 16, 2017

In a bankruptcy proceeding surplus income is to be calculated by your trustee who is required to consider the guidelines provided by Directive from the Office of Superintendent of Bankruptcy.  The guidelines are based on the LICO (or Low Income Cut Off).  You might think of the LICO as being a poverty line.

The LICO suggests that for year 2017 a single person requires a take home income of $2,121 per month to meet the necessities of life, including accommodations, transportation, food and clothing.  To achieve a net income in line with the LICO a person would need to earn more than $15 per hour and be working at least forty hours each week.  According to Statistics Canada the Canadian Median Income is a mere $27,600, meaning that more half of Canadians earn a net pay that is significantly less than the LICO.

Although the LICO may appear relatively generous, it probably isn’t making allowances for all modern living expenses.  The LICO was first calculated in the early 1950’s, when lifestyles were much simpler, and have been adjusted for inflation.

If you do have income calculated as surplus using the formula you could be held into bankruptcy for an additional twelve months and be required to pay half of the surplus (the amount that exceeds the LICO) to your trustee.  But do not despair, there is a process called mediation that can be invoked to reduce or reorder payments required.