Does surplus income increase the likelyhood of not receiving an automatic discharge after nine months
I heard that if you earn any surplus income during your bankrupcty period you will increase the likelyhood of not receiving an automatic discharge after nine months. Is this correct? If so, doesn’t that seem strange? I would think that it would be a positive thing for someone to earn a little extra money and contribute to the estate.
The Bankruptcy and Insolvency Act is designed to balance the needs of the people that are filing bankruptcy with the rights of the people that lend money. Surplus Income is one of the Act’s balancing provisions.
The concept is simple enough – the government has established income thresholds for families of different sizes. If your income exceeds the threshold then a portion of the excess is paid into your estate for the benefit of your creditors. In this way, you get to keep all of your income up to the amount that the government has established your family requires for a reasonable standard of living and everything you earn above that is split with the people that you were indebted to.
The Act currently states that your trustee may extend you bankruptcy by up to an additional 12 months if you are required to make surplus income payments. The application of this part of the Act varies across the country – in some places your bankruptcy is extended, in others it may not be.
Bill C-55 was passed last November, (but has not been enacted yet) in part to address these regional variations. Once it becomes law all bankrupts that are required to make surplus income payments will be extended to 21 months (for first time bankrupts).
Surplus income often causes a fair bit of confusions – make certain you discuss it in detail with your trustee before you file an assignment.