What is surplus or excess income in a bankruptcy situation?

The surplus income amount payable by the debtor is one of the factors that determines how long someone would stay in what I like to call the bankruptcy pool. There are specific lengths of time, outlined under the bankruptcy and insolvency act that depending on individual circumstances, that a debtor must stay in the bankruptcy pool. The two main factors that determine how long the surplus income needs to be monitored in a bankruptcy are:

  1. If a debtor has at least hundred dollars per month for the first nine months of surplus income
  2. If a debtor has been bankrupt before

length of bankruptcy

As a general rule, if you do not have surplus income and have not been bankrupt before then you’re eligible for discharge from the bankruptcy at the end of nine months. This would mean at the end of nine months we stop monitoring your surplus income. If you do have surplus income, and have not been bankrupt before, then we would monitor surplus income for a total of 21 months at which time you would be eligible for an automatic discharge from the bankruptcy. This means the end of the 21 months, we stop monitoring personal income and stop calculating the surplus income amount.

Sometimes at the end of this period, debtors have not paid the full outstanding amount that was calculated over the 21 months. In these cases, an agreement can be reached based on the debtor’s ability to pay. They can pay the outstanding surplus income that was calculated to the end of 21-month period over a longer period of time. There is no interest charged on these payments but the debtors cannot be released from the bankruptcy pool until the full outstanding surplus income for the 9 or 21 months. Is paid to the trustee. Therefore, some people remain in the bankruptcy pool past the 21-month stage but the calculation of the surplus income amount ends at the end of the 21st month.

If the debtor has been bankrupt before, they are not eligible for discharge before the end a 24-month period. If after those 24 months, if the debtor is determined to have excess income, their bankruptcy is extended to 36 months.

You may also find these articles useful:

Surplus Income Calculator

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