*Please note that this article has been updated with the 2017 surplus income limits
Surplus income is calculated based on family income, so all members of the family disclose their income. If the husband is declaring bankruptcy but the wife is not going bankrupt, the husband is still supposed to declare his wife’s income for the purpose of calculating surplus income.
What happens if the non-bankrupt spouse refuses to disclose their income? A trustee has no power to compel the non-bankrupt spouse to do so, since the spouse isn’t bankrupt.
In that case, Directive 11R, paragraph 6 (2) states that:
“Where the non-bankrupt spouse refuses or neglects to divulge his or her income or expenses, the trustee shall, for the purposes of determining surplus income, apply 50 percent of the applicable Superintendent’s standards corresponding to the number of persons in the family unit.”
Complicated we know, but here’s an example (using round numbers to make this easy to understand):
If the limit for a family of two is $2,640 and the non-bankrupt spouse refuses to disclose their income, the limit is reduced to $1,320. So, if the bankrupt has income of $2,640 per month, he is $1,000 over the revised limit, so he would have a surplus obligation of half of that, or $500 per month.
As you can see failure of the non-bankrupt spouse to report income can prove to be very costly. The amount you will need to pay in surplus income payments can be much higher than if the spouse did disclose their income.
What you should do
In practice, we recommend that if possible the non-bankrupt spouse should disclose their income, because in most cases doing so will reduce the amount the bankrupt would be required to pay in surplus. If that is not possible, a consumer proposal could be considered as an alternative to filing bankruptcy and paying higher surplus income payments.
If you are concerned, talk to a bankruptcy trustee in your area before filing bankruptcy.
I have a lot of pay day loans that I cannot pay total about $7000. My husband does not know about them… I would like to declare bankruptcy and get them off my back…. but I do not want my husband to know about or have anything to do with it… Is that possible?
Also can this all be done on line as we live in a small country town?
You are legally allowed to file bankruptcy on your own; you are not legally required to tell your husband that you are filing bankruptcy. However, if at some point in the future you and your husband apply for a loan and you are denied or charged a higher interest rate because of your bankruptcy he may find out, so you should decide if it is better to tell him now, or deal with it if he finds out in the future.
It is not possible to file bankruptcy in Canada on line. Under Canadian law you are required to meet in person with a licensed bankruptcy trustee to assess your situation and advise you of your options. If you live in a small town that may require you to travel to a larger town. We suggest you contact a trustee and discuss your concerns over the phone, and then decide if bankruptcy is the correct options for you.
If my husband is making monthly bankruptcy payments and I’m declaring my income along with him, what happens if I receive an inheritance? Note, I have not declared bankruptcy. Is it really fair that my half of my inheritance will go towards his bankruptcy? What if I give it all away to my grandchild and just not tell him about it?
Hi Eevina. If you are not bankrupt, you getting an inheritance does not impact your husband’s bankruptcy. An inheritance is not income, (it’s an asset), so as long as the inheritance is not in your husband’s name while he is bankrupt, it has no direct impact on his bankruptcy.
Hi, I am planning to file a consumer proposal due to my inability to pay all my debt. I need some clarity o the followings:
1. I do not have job but husband has one. Could I file a consumer proposal based on my husband income?
2. I have car loan, what will happen to my car? Can i still keep my car and pay the monthly payments?
3. My husband also had filed consumer proposal the payment are almost been paid out. Any impacts on my husband proposal? Or any potential impacts on my consumer proposal due to his proposal that is almost done?
1. Yes, you could file a proposal even if you have no income. It would be up to the creditors to decide whether or not they accept that proposal, since they may have concerns about your ability to make the payments.
2. If your car payments are current, you can continue to make the payments even in a consumer proposal, and keep the car.
3. Your proposal would be separate from your husband’s, so since his is already up and running your proposal should have no impact on his, and vice versa. They are two separate legal proceedings.
Great, thanks for the prompt reply. Do you have office in Nova Scotia? If not can I file consumer proposal in Ontario…i am living in Halifax, NS. It seems I can not use my husband income i thought I could and that my husband income will be considered as part of family income. Thoughts?
Hi Mona. We have an office in Halifax. Our bankruptcy trustee and consumer proposal administrator in Halifax, Nova Scotia provides no charge initial consultation and can explain the process in detail, including how your husband’s income would impact your consumer proposal.
I have considered going bankrupt as a sole proprietor… my wife now “despises” me and I have moved out. Seems like a seperation?? So is her income still required to be disclosed? What, if any, documents are needed additionally now?
If you are separated, you are not required to disclose your ex-wife’s income. Whether or not you are separated is a question of fact, which can be questioned by the trustee or your creditors. Ideally a separation agreement is good proof of a separation, but assuming you can prove that you are living at a different address, that should be sufficient evidence that you are separated.
My husband is thinking of filing for bankruptcy. The house that we live in is in my name only. When I go to renew the mortgage, The bank has him sign a sheet of paper saying that he gives me his consent to renew. I have paid all the payments for the mortgage not him. Would my house be affected?
If his name is not on title (and you haven’t recently taken it off title) then the house would not be involved/included in his bankruptcy. Make sure you discuss this with whichever trustee your spouse decides to deal with.
I am from Ontario. My husband got himself into debts which he has now difficulties paying back and he plans to file for bankruptcy or consumer proposal. We have a house in both our names and I personally have some savings.
Does bankruptcy, consumer proposal or debt consolidation jeopardize my house or my personal assets, if he will not be able to pay back his debts if I don’t give my consent?
If my husband does not know about my saving, can trustee or consolidation firms check banks for my personal accounts?
If your spouse files for bankruptcy or a consumer proposal it will deal with his debts and the things that he owns. Your savings are safe if they are in an account that he doesn’t have access to.
The house is a bit more complicated. Since you both own it, if he files for bankruptcy then his creditors are entitled to his share of the equity in the house. (Equity is the amount of money that may be left over if the house is sold and the mortgage and other charges are paid off). For example, let’s say there is $50,000 of equity in the house – your spouse’s share would be $25,000. To keep the house the bankruptcy will need to receive $25,000 either from y9our spouse, or from you (if you want to buy his half) or someone else. Your husband shouldn’t sign any bankruptcy papers until/unless you have a plan in place how to deal with any equity in the house.
If he is filing a consumer proposal then he’ll need to offer to repay an amount equal to what his creditors may receive if he files for bankruptcy. That means if there is equity in the house it will impact how much your spouse has to offer to repay in his consumer proposal.
I strongly suggest you go with your husband when he speaks to a trustee so that you may ask all of these questions directly to the trustee and hear the answers for yourself. Better to be in the room yourself when this is all being worked out…
I hope this helps.
My husband is in a bankruptcy. We reconciled 5 months ago.. he’s been in the bankruptcy almost 2 yrs..
Can the trustee compel us to declare my income? Or can he continue to just use his own income and declare his share of household expenses? We have 5 children. If he only uses his own income, I understand that his house hold size will be himself +2.5 kids.
I make more money than he does (on paper). so I believe it would be more costly to include my income in the bankruptcy budgets/calculations.
It sounds to me like you understand the math – if you are living in the same household your husband is required to disclose your income (if he knows it). If he does not disclose it then his income allowance will be cut in half. You are under no obligation to disclose yourself (since you haven’t filed). You should have enough information to do the math yourself to decide whether or not he should disclose…
If for some reason your husband ends up in Court at the end of his bankruptcy and the Court asks for your income it is a different story. Refuse a Court request at your own peril.
From what I have read, I have to disclose income if my husband declares bankruptcy. Is this in a monthly disclosure or annual salary? I ask because I am about to take a casual snd seasonal part-time job (I have health problems that make working difficult and have been a stay at home Mom for years). I am worried that if the little bit of extra money I earn (it will vary week to week during the summer only) takes his surplus over, that I will just lose that income since he would have to male a higher payment because of it. Also, do I have to disclose any debt that I have in my name only? He has been helping with the payments, they are credit card and student loan – so I wondered if he has to declare as an expense since he helps with payments. I am looking for help from family with my personal debts. As well, my parent died and his house is being sold this summer (my husband is not named as beneficiary) and I want to be sure none of it will be taken because of my husband being bankrupt or that it has to be reported, as income for instance, and that it will remain completely unaffected and a private matter. Thanks for your help.
To be clear, the various duties and responsibilities of a bankrupt only directly apply to the person that filed bankruptcy. If a spouse hasn’t filed then the rules do not apply to the spouse. The bankrupt is required to disclose the monthly income of the household in which they live – that includes the spouse’s income and anyone else contributing to the household. If a bankrupt’s spouse decides not to disclose (which is their right) then the bankrupt will only be entitled to 50% of the normal income allowance for the family. For example, the government has said a family of 4 has a threshold of $4,094 of income per month before any additional payments are required in a bankruptcy. If the bankrupt’s spouse fails to disclose their income then the threshold is reduced to $2,047. The family can do the math themselves to determine whether it makes sense for the spouse or not.
Similarly, bankruptcy only deals with the bankrupt’s debts and assets. Debts that are wholly in a spouse’s name are not dealt with, and an inheritance received by a spouse is not subject to any sort of seizure. I hope this helps – I suggest you call your spouse’s trustee if you require a more detailed explanation.
My common-law spouse refuses to provide income and expense information in relation to my personal bankruptcy. Yet, the Trustee is still requiring my spouse’s personal information and including them as a family member for surplus income calculations. Is this acceptable? In addition, are Trustees required by law to ask for non-bankrupt spouse’s SIN number and place of work information etc?
Hi Bob. The surplus income is a family calculation. However, there are specific procedures for a trustee to follow if the non-bankrupt spouse refuses to disclose their income (you can read the actual law here, starting at paragraph 6: https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03249.html ) so I would suggest you meet with your trustee and work out a plan to deal with the surplus income if your spouse will not disclose their income.
Hi there ,
My husband has in a bankruptcy and I am in a consumer proposal . I want to change careers and leave the government . I will be getting the transfer value of my pension which a high lump sum . Will my husbands bankruptcy take most of this ?
Hi Wendy. Presumably you will be transferring your pension into an RRSP, so you don’t really get the cash immediately. Since this is your asset and not your husband’s, it would have no impact on his bankruptcy. Your trustee can explain in more detail if you want a more complete explanation.
If I do not declare my wife income in bankruptcy, can I still declare child care expenses to reduce income surplus?
If you are the one paying them, yes. Keep in mind if you spouse does not disclose their income then you are only entitled to 50% of the normal income allowance for your family. For example, right now a family of 4 is entitled to total household income of $4,178 before any surplus income payments become necessary. If the spouse refuses to disclose in this example then the limit is reduced to $2,089.
I am being threatened with a very large $20,000+ fine that I do not plan on paying. Eventually, this might land in collections and I will file either a CP or Bankruptcy. I already have a CP from 3 years ago with 5000 dollars left to pay. This fine is related to my business but I am not incorporated. Months ago I decided to move all my money into my wifes account as a percaution. I have access because it is joint. Can any of those assets be seized if I file? I want to go to the bank and remove the joint function so that she has her own account. I don’t have any other assets as I rent and only have a car loan which I will continue paying.
Unfortunately John, neither a consumer proposal or a bankruptcy will deal with a fine. Only the Court that levied the fine originally can change it.
If your spouse initially decided to refuse to disclose their income for surplus bankruptcy, can they change their mind part way through and start disclosing?
Certainly, but it would be retro-active back to the start of the procedure.