Bankruptcy and Surplus Income Calculation For A Family

*Please note this article has been updated with the 2018 numbers

When you file for bankruptcy, part of the cost of filing is based on how much income you earn. Depending on your income, you may be required to pay something called Surplus Income. Where it get’s confusing for many is that this payment, while paid only by the bankrupt, is based on their overall family circumstances.

There are several things you should know if you are married with a family versus single when determining surplus income payments:

1. The government adjusts the surplus income threshold based on family size. This is because they know it costs more for a family to live than one person. For example, in 2018, if you are single the surplus income threshold is $2,152 but for a married family with two children (a family of four) it is $3,998.
2. How many persons living in your household does not necessarily mean living under your roof. If you have children away at school, but you still support them then they may still be counted as part of your household.  Family size can also include parents, if they are living with you and dependent upon your income.
3. Surplus income is based on total household income – this means all of the money coming into the household earned by everyone in the house.  As such your spouse (and any other family members earning money) will have to disclose their personal income as part of the bankruptcy process.
4. You are permitted certain deductions, again based on the total household.  If there are any of these items we need to know who is responsible for making the payments so we can adjust the household income appropriately.
5. While surplus income is based on your family size, income and expenses, you only pay your share of your household’s surplus income amount.

As you can see, the calculation can get quite complicated. That is why it is important to talk to your bankruptcy trustee about your family finances as a whole before filing bankruptcy. They can talk to you about other options that may make more sense in your circumstances.