Case Study: Bankruptcy and Surplus Income

Case Study: Stephanie

Stephanie has discussed filing for bankruptcy with a Licensed Insolvency Trustee. The trustee explains how Stephanie’s income requires her to make payments during her bankruptcy.

Meet Stephanie, the mother of a young son, James, who is just about to enter primary school.

Recently, Stephanie has overextended her credit and, despite her best efforts, is unable to pay her bills.

Realizing that she needed to speak to an expert, Stephanie found a Licensed Insolvency Trustee located in her area and has gone to meet with her.

After speaking to the trustee, Stephanie has determined bankruptcy was the most appropriate option for her.

After explaining the bankruptcy process and looking more closely at her income, the trustee told Stephanie that she will have to make what are called “surplus income payments.”

These payments ensure that people who declare bankruptcy and have sufficient income, contribute to paying off a portion of their debt.

In simple terms, surplus income is the amount of income a person who has declared bankruptcy has that is over and above what they need to maintain a reasonable standard of living.

The amount they have to pay is calculated according to standards established by the Office of the Superintendent of Bankruptcy Canada.

Stephanie will have to make these surplus-income payments for a total of 21 months because this is her first bankruptcy. If this were her second bankruptcy, the payments would have to be made over a longer period of time.

Stephanie was also told that if her income changes at all during bankruptcy, she must inform the Licensed Insolvency Trustee, as this may affect the amount of her payments.

Stephanie knows she has some work to do but feels a weight has been lifted.