Surplus Income and Bankruptcy Discharge
When you file for Bankruptcy, you keep a sufficient amount of your income to live a “normal life”. The trouble is that the definition of a “normal life” is based on a cross-Canada average calculated by the Office of Superintendent in Bankruptcy. It starts with your net (after tax) take-home pay and allows for expenses such as: child and spousal support payments, child care, medical condition, court imposed fines or penalties and expenses related to your employment recognized by the Income Tax Act. Unfortunately, the average of high cost areas such as Toronto and Vancouver are merged with low cost areas. If you live in a high cost area, you may have difficulties.
In bankruptcy, after surplus income is calculated, 50% of the amount must be paid to your Licensed Insolvency Trustee. They then divide the amount among your creditors. For first time bankrupts, you pay the surplus for 21 months, for 2nd time bankrupts, you pay for 36 months. For a more detailed reading of Directive 11R2 – 2016, please contact the Office of the Superintendent of Bankruptcy Canada.
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