Surplus, what Surplus?

October 19, 2023

• Bankruptcies
• Something to Think About

“Surplus what surplus?”  Licensed Insolvency Trustees hear that all the time.  In previous blogs we have talked about the history of surplus income as well as how it is calculated.  In this blog we want to dive a little deeper into mitigating your exposure to high payment requirements.

As previously discussed, in earlier blogs, the BIA provides a structure to ensure that there is some level of equitable accountability for high income earners who get into debt problems.  The structure involves a framework for the contribution of additional payments based on a “Surplus Income” calculation using the Superintendent’s Standards.

LITs should not rely wholly on the Standards but should use their professional judgement in assisting Debtors to negotiate the system which is purposefully more complex than strict adherence to a structured framework.

The Superintendent has built into the process several options for Bankrupt individuals to redress the formula driven calculations and to find an alternative solution to a rigid payment regimen.  There are two options that are contemplated by the Superintendent, the first is the process of “mediation” which can be used to reduce the amount required to be paid, and/or to work out alternative payment terms.

In addition to mediation the LIT has the option of resolving quantum and payment term issues through the Court on application for the discharge of the Bankrupt.  The Court, at its discretion, can set terms as a condition for the Bankrupt’s discharge, and the Court can change an existing payment arrangement fi the Bankrupt experiences an adverse material change following the issue of a previous order.

The bottom line is that Surplus Income payments are not set in stone and are not intended to create hardship for unfortunate individuals.  We are living through a period of extreme inflation that would probably be far worse than the Great Depression if it were not for easy access to debt.  The Superintendent is aware of the challenges Canadian Consumers and is quite amenable to circumstantial reviews through the mediation process.

If your LIT demands that you pay surplus and you wonder “what surplus?” take comfort in knowing that you have options.