Comments on: Surplus Income: How the New Rules Could Extend the Cost of your Bankruptcy in Canada

By: mariah

mariah — Sat, 23 Apr 2011 01:34:42 +0000

I am confused.
Does the spouse`s surplus income extend husband`s bankruptcy to 12 months.
If bankruptcy does not affect the spouse, why her income is reported every month to the trustee?

By: dale underhill

dale underhill — Mon, 31 Jan 2011 04:06:39 +0000

I know people who have gone bankrupt that have their own homes and they did not have to sell them, How is this possible

By: SF

SF — Fri, 07 Jan 2011 18:53:06 +0000

What happens if you become pregnant while in bankruptcy and will be going on maternity leave before your 21 months are completed?

By: Doug Hoyes

Doug Hoyes — Sat, 31 Jul 2010 17:38:23 +0000

Good question, and yes, these rules are very confusing. Here’s the answer:

If the bankrupt’s average income is less than $200 over the limit, they are not required to pay the surplus income penalty ($72 in your example), and if they have completed all of their other duties, they would be discharged in nine months.

The confusion arises due to the fact that average income can only be calculated after a minimum of six months. So, each month the trustee will tell you what is owing for surplus income; what you will actually be required to pay will not be determined until the averaging is completed, generally in month seven or eight of the bankruptcy.

As this is a confusing area, you should consult with a trustee to fully understand the calculation that will be done in your situation.

By: confused

confused — Fri, 30 Jul 2010 18:59:06 +0000

I am still confused regarding the answer to TD. I know that if your income above the threshold of $1884 (for a single person) is over $200 ($2084 net monthly) the bankruptcy is 21 months, asumeing first time. However, what if the first time single bankrupts income is below $2084 net monthly?
Example: a single person during bankruptcy is paid by salary, net monthly of $2028 every month with no income changes – therefore; $144 over the threshold of $1884 each month. Is a payment of $72 required (50% of $144) and will the single bankrupt person be discharged after 9 months?

By: Doug Hoyes

Doug Hoyes — Sat, 12 Jun 2010 23:33:03 +0000

Since each case is different, and since your bankruptcy was commenced under the pre-September 2009 rules, you should discuss this in detail with your trustee. I would suggest you book a meeting with your trustee and ask them to explain in detail what is required to complete your bankruptcy. You will want to know exactly what is owing, and how you can pay it. You will also want to advise them of your change in income, to see if that will change the amount you owe.

Ultimately if you don’t agree with the trustee’s decision, you can request a court discharge hearing, where you explain your situation to a bankruptcy judge or Registrar. Since the courts have different approaches throughout Canada, your trustee, or a bankruptcy lawyer, are the best people to give you advice on your specific situation.

By: L

Fri, 11 Jun 2010 04:52:20 +0000

We filed for bankruptcy Nov 08, my husabnd was discharge as of July 09, mine was extended for 4 months based on surplus income. I recieved a letter from the trustee expalining I had until July 10′ to pay in full the outstanding owed balance ( accumualtion of surplus income and trsutee fees). Since the letter my level of income has changed, what happens if i am not able to pay the outstanding amount ? Will I be un-protected by bankruptcy proctection from my debts in filing bankrupcty in 08′? What happens and what is the process?
I have contacted my trustee and was informed that the only option was to have the amount paid in full by July ’10, is this so?
L

By: Doug Hoyes

Doug Hoyes — Sun, 16 May 2010 12:44:22 +0000

Ian: In a first bankruptcy, the trustee is required to calculate your average income after at least six months in your bankruptcy. If at that time your average income is more than $200 per month over the limit allowed (based on your family size), your bankruptcy is automatically extended for a further 12 months (21 months in total). The trustee must continue to obtain proof of your income until the trustee files Form 82, “The Trustee’s Report on the Bankrupt’s Application for Discharge.” Once that report is filed, the trustee may continue to obtain proof of your income, but they are not required to.

Obviously that is not a very clear answer, and because these rules are relatively new, there is no jurisprudence to provide any direction. Therefore I can only suggest you discuss this in detail with your trustee, to see how they expect to be interpreting the rules in your case.

As for selling your house, yes, if you sell your house during the 21 month period for more than it was originally appraised at, the trustee would take that increase in value. In other words the same rules apply during the entire 21 months of the bankruptcy with respect to assets.

Again, these are complicated questions, so you should review them in detail with your trustee.

By: Ian

Ian — Thu, 06 May 2010 07:25:15 +0000

I have a question regarding the below answer you had given to someone above.
If my suplus income was minimal and just over the $200 per month averaged over the first 9 months and they extend the bankruptcy to 21 months and set a rate to be paid during the extended 12 months.
What are the implications once surplus income is calculated and I have a wage in increase due to a job change? Does the surplus income payment go up? What if I have to sell my house during the 10 to 21 month period and end up with any profit?
I guess what I am asking is on the extended part of a bankruptcy do the same rules apply that are for the initial 9 months?
Thanks

TD: Each month you are bankrupt you report your income to the trustee. At the end of six or seven months the trustee will average your income, and based on that average your bankruptcy will be extended for 12 months if you have excess surplus income. The determination is not made at the start of your bankruptcy. Once the bankruptcy is extended and the amount you are required to pay is fixed, the bankruptcy runs for an additional 12 months. If your income then drops (say in month number 14), there is a procedure to adjust your payments if appropriate.

By: Doug Hoyes

Doug Hoyes — Sun, 21 Feb 2010 13:37:09 +0000

In general, as soon as you realize that you are insolvent (unable to pay your debts) you should stop using your credit cards. If you are insolvent, that probably also means you don’t have the money to pay your credit cards, so you will also stop paying them. However, once you stop paying your credit cards, your creditors will begin to pursue you (with phone calls, letters, and perhaps court action), so that’s when you will probably begin the bankruptcy process. The timing of each situation is different, so I recommend you speak to a local bankruptcy trustee to review your specific situation.