How Does Surplus Income Impact the Bankruptcy Process?
How Surplus Income Impacts the Bankruptcy Process
Surplus income in bankruptcy is a crucial issue.
It’s essential to understand how income levels can impact a bankruptcy claim.
In Manitoba, there are precise levels of income past which they can affect your proceedings.
If for any reason, your income goes beyond a threshold during your bankruptcy, you’ll need to make extra payments to your trustee.
If you want more information about the subject, it’s worth taking a look at the Office of the Superintendent of Bankruptcy website to find Directive 11R2.
Here are the general principles about surplus income in bankruptcy.
Consider This Example of How Surplus Income Works
Let’s consider a real-world example that explains how the process works. We’ll start with data from the Surprise Income Calculation.
Mary is a single filer who makes $20 hour and works a typical 40 hour work week.
She gets paid bi-weekly and has take-home pay of $1,400 which rarely fluctuates.
To calculate surplus income for Mary, you would multiply the monthly total take-home pay of $2,800 (2 x $1,400).
The government threshold only allows for an income of $2,089, putting her income $711 per month over.
She’ll have to pay the surplus income take rate of 50%.
She’ll end up adding $355.50 to her trustee’s payments each month.
You May Need to Pay at a 50% Rate
If this is the first time in bankruptcy, you will need to make 21 months of surplus income payments.
If it’s a second time, the number will extend to 36 months.
Anyone with over 200 dollars of surplus income will have to pay the surplus rate of 50%.
If for any reason a non-bankrupt spouse doesn’t divulge expense or income, trustees then place 50% surplus income fee on them.
The two times the trustee reviews your financial papers is when Form 65 is first entered and during the eighth month of the case.
When the review takes place, the trustee also considers the bankrupt’s current financial condition.
They’ll determine what the average monthly income and will add up minimum income and expense statements.
They go back two years before the first filing of Form 82.
That income level is the amount used to determine what amount they must pay each month.
You’re Safe If Your Surplus Income Is Under $200 Each Month
In summary, if you earn less than 200 each month in surplus income in the bankruptcy process, you won’t have to pay extra.
That only kicks in at 200 and is a 50% surplus for 21 or 36 months, depending on your number of bankruptcies.
If you find out that your income rises after your initial hearing, you’ll need to notify your trustee.
Although the process of bankruptcy sounds daunting, it’s sometimes a necessary step towards wiping the slate clean.
Filing may help you start on a fresh start on the road to recovery.
Sometimes it’s the fastest way to solve debt problems once and for all.
What You Need to Know
The summary for surplus income and what you’ll need to pay is as follows:
- You only pay if you’re income is over a certain amount;
- If the amount is less than 200 per month, you will not pay;
- If the amount is higher than 200 each month, you will pay at a 50% rate;
- Contact your trustee to calculate the correct payments.
You’re Not in This Alone
Discover the ways we can help you with your bankruptcy filing.
When you need a Licensed Insolvency Trustee, look no further than Bankruptcy Manitoba.
We help ensure you handle all the aspects of your case correctly, including any surplus income you have.
We always make sure you understand the process so that you can get on with your life.
The whole subject of surplus income in the bankruptcy process can be complicated.
Contact us today to discuss how we can help get you through the process.
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