Surplus Income in Three Pay Month While Bankrupt in Canada

Category: Bankruptcy Q&A

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

Question: I have a three pay month the second month in bankruptcy, and those funds were already earmarked for car repairs. What happens if I can’t pay the surplus income for that third pay?

Answer: You should speak to your trustee, and make payment arrangements.  This is particularly important for anyone who has surplus income and three paydays in a month.

If you are a first time bankrupt and your average income each month is  $200 or more over the limit set by the federal government, your bankruptcy will be extended from 9 months to 21 months.  That means you will have a full 21 months to make all required surplus income payments.

For you, your best option will be to work with your trustee to estimate what you are likely to owe over the 21 month period, and then spread that amount out over the 21 months.

For example, if in a two pay month you will owe $500 in surplus, but in a three pay month you will owe $1,000 (and that happens twice in a year), you could average that out to just under $600 each month, and pay the same amount each month.

Another option is to make your surplus income payments every two weeks, when you get paid.  So, for example, instead of paying $500 once per month, you could pay $300 every two weeks, on payday.  (At that rate you should have your payments finished before the end of your 21 month bankruptcy period). Most trustees can set you up to pay via pre-authorized payment, so the payment will be taken automatically from your bank account on payday.