Surplus Income…
I’ve just filed for bankruptcy due to health problems, and have been waiting for my long term disability company to make payments for my time off previous to the bankruptcy.
I know any income I get after I filed is subject to surplus (which it will qualify for)… but I have gone 4 months without a paycheque and is there any way I can keep even part of the money to help pay for prescriptions and stuff upcoming?
My trustee says he will read the fine print on the disability papers but he said be prepared to lose it all. I know my creditors deserve any monies that can be supplied, but don’t I deserve a portion of these funds as I would in a regular month?
Most bankruptcy trustees in Canada will require you to make a set payment each month, regardless of your income, to cover the costs of administering your bankruptcy. If your income is higher than the surplus income threshold, you are required to contribute more while you are bankrupt. In your case, if you are below the surplus income limit, you would only be required to make the minimum contribution set by the trustee. For more information, contact a licensed trustee.
This largely depends on the practices of your local court, so I you would be best to confirm this with your trustee, but I can tell you in Alberta, you could expect your bankruptcy to last an additional 12 months (i.e. 21 months in total). This is simply due to the fact that you now have more means and the court will expect you to contribute more than would have been expected previously, regardless of whether you could predict this change or not.
When you finally receive your retro-active disability cheque your trustee has two alternative that they may chose from in determining how to handle the cheque.
The first option is to treat the retro-active payment as a windfall and seize the entire amount for the benefit of your creditors. This may seem harsh, but the assumption is that you relied upon your credit during the period that you received no payments and therefore the money should go towards your debt.
The second option (and frankly it is the more common approach) is to treat the payment as income in the month you receive it. That income will be subject to the Surplus Income Standard and therefore a portion will be payable to your trustee for the benefit of your creditors. If you trustee selects this approach you will be able to retain a portion of the money.