What Is Surplus Income

At several points in this web site we have used the term Surplus Income in connection with a bankruptcy. The purpose of this post is to quickly explain what Surplus Income means. We are working on a more detailed web page explaining the term, but I thought I would just post quick description. The Office of the Superintendent of Bankruptcy gives bankruptcy trustees guidelines each year in order to assist in the determination of whether an individual or family has "surplus income". For example, the guideline for a single individual is $1,836 for 2008. If single individual has net family income higher than this amount, they will generall be required to pay one half of the excess into the bankruptcy, for at least the nine month period that the bankruptcy lasts. If, for example, the individual had net family income of $$2.356, they would be $500 over the guideline amount and be required to pay $240 a month to the trustee for the benefit of creditors. If there is significant surplus payments can be required for a longer period. "Net family income generally means take home pay, but certain expense can be deducted in calculating  this number, for example, alimony and child support, child care and expenses as a condition of employment.  The guideline amounts increase based on the number of individuals in the family, and are adjusted for inflation each year. However, the guidelines are not adjusted to reflect the cost of living across the country and it doesn't entirely make sense to apply these same guidelines to Vancouver and to Brandon, for example. We have found these guidelines useful in an insolvency setting in a number of ways as follows: a) if a person, or family, has income under these guidelines it is unlikely that they will be able to make a successful proposal to their creditors requiring any significant monthly payment; b) these guidelines are useful in assisting you in determing what reasonable cost to live is, for a given family size (although as noted, that depends on location) c) if a person, or family, does have surplus income  they may very well be able to file a proposal, or use one of the other options discussed on our web site rather than having to resort to bankruptcy. This is a complex area and we strongly recommend you consult with one of our insolvency team who can review your particular situation in detail. There is not cost for an initial consultation. Ian Schofield MNP Regina Saskatchewan