Surplus income dilemma

October 9th, 2008 by Questions

I am considering personal bankruptcy because a failed business has left me with a large amount of unpaid credit card debt, which I am unable to pay.

However, the surplus income rules seem to make things impossible. It costs us $7,000 / month for our family of three to live (that might sound like a lot, but that is really what it costs us in rent, car payments and food, utilities and no luxuries).

Under the surplus income rules, it seems that we`d pay for surplus income over $2,811. If we bring in $7,000 / month, we`ll have to pay 50% of the first $500 ($250) and then 75% of the balance ($2,766.75). So suddenly we`re back down to $4,000 / month and can`t afford to live.

And if we earn more money, then we`re just creating a larger amount of surplus income. It seems like an impossible situation.

In this scenario, is it impossible for me to declare personal bankruptcy and make a decent living afterwards?

Posted from: British Columbia


One Response to “Surplus income dilemma”

, A licensed trustee said:

I know you’re not going to like this answer, but many people are able to live within the governments threshold for a family of three. I understand that your living expenses run $7,000 per month, but those are based on lifestyle choices that you have made and can be changed (in fact, if you’ve been using credit to maintain your lifestyle they will have to change).

The surplus income rules were put into place because before they were established high income earners would file for bankruptcy, pay a basic fee and walk away from their debts. The surplus income rules put a stop to that practice.

An alternative that you may want to consider is to file a proposal to creditors. With a proposal you offer your creditors new repayment terms – the catch is you must offer your creditors a greater benefit than they would receive if you filed for bankrutpcy. The benefit of a proposal is that you can stretch those payments over a period of up to five years. You’ll end up paying more overall, but less every month.

You have some very difficult decisions in front of you – good luck sorting things out.

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