Surplus income, single with adult child

Category: Bankruptcy Q&A

Note: the question in this article contains old surplus income limits. Click here to review the updated limits.

Question: I am going to be claiming bankruptcy in Canada within the next month. What is the new surplus amount allowed for 2012?Also, my daughter (22) still lives with me while she is finishing school. She works part time and does not pay me anything. Do I have to claim her income and debts also?

Answer: The surplus income limits are revised by the government around March of each year, based on the Consumer Price Index for the previous year.  As of this writing (in January, 2012) we do not yet know the revised 2012 numbers, so if you go bankrupt now, your trustee will base their initial calculations on the 2011 surplus income numbers.

UPDATE: The most recent surplus income limits can be found here.

In determining the size of your family, you have to decide whether or not your daughter is a dependent.

If she is a dependent, she is part of your family, so your surplus threshold increases from a family of one to a family of 2, which is good for you.  However, it also means that you are required to include all of her income in the surplus calculation.  Since the threshold increases by $472 when moving from a family of one to a family of two, if your daughter earns more than approximately $500 per month working part time, it is not to your advantage to include her as a dependent.  You may therefore decide she is not a dependent, which means your threshold is lower, but her income is not included.

As you can see, the math is somewhat complicated, and there are other issues to consider, such as when does she finish school, and how much is she earning.

For full details, we suggest you contact a licensed bankruptcy Canada trustee for a no charge initial consultation, so they can help you crunch all of the numbers.  If you are expecting high surplus income, a consumer proposal is another option to consider.