Surplus Income
Payment In Bankruptcy
Surplus Income Payment In Bankruptcy (Section 68)
Section 68 of The Bankruptcy & Insolvency Act
Note: Entire Bankruptcy & Insolvency Act can be found at http://laws-lois.justice.gc.ca/eng/acts/b-3/
Each year the Superintendent of Bankruptcy updates the Superintendent Standards, which all Trustees have to use. The purpose of the Standard is so that all citizens across Canada are treated fairly. The Standard sets out the minimum amount of money that a person is allowed to make before their creditors are allowed to demand a portion of the monthly income. Any earnings above this threshold amount are called surplus income. You will be allowed to keep 50% of any surplus income with the remaining 50% going into your bankruptcy estate, for redistribution to creditors. The amount you are allowed to make is directly proportionate to your family size, your dependents, your medical expenses and other unique features. This amount is determined in connection with Directive 11R2 and Section 68, which is reproduced below. A Bromwich+Smith Debt Relief Specialist will help determine what your surplus income payments would be, if any.
Surplus income can be very tricky to determine and is open to interpretation. If there is a disagreement with respect to how much surplus income you should have to pay the matter can be referred to a mediator and/or the Court. This usually doesn’t happen, however, because if you do have surplus income payable in a bankruptcy we try to help you force a settlement on your creditors with a Consumer Proposal.
68 (1) The Superintendent shall, by directive, establish in respect of the provinces or one or more bankruptcy districts or parts of bankruptcy districts, the standards for determining the surplus income of an individual bankrupt and the amount that a bankrupt who has surplus income is required to pay to the estate of the bankrupt.
Definitions
(2) The following definitions apply in this section.
surplus income means the portion of a bankrupt individual’s total income that exceeds that which is necessary to enable the bankrupt individual to maintain a reasonable standard of living, having regard to the applicable standards established under subsection (1). (revenue excédentaire)
total income
(a) includes, despite paragraphs 67(1)(b) and (b.3), a bankrupt’s revenues of whatever nature or from whatever source that are earned or received by the bankrupt between the date of the bankruptcy and the date of the bankrupt’s discharge, including those received as damages for wrongful dismissal, received as a pay equity settlement or received under an Act of Parliament, or of the legislature of a province, that relates to workers’ compensation; but
(b) does not include any amounts received by the bankrupt between the date of the bankruptcy and the date of the bankrupt’s discharge, as a gift, a legacy or an inheritance or as any other windfall. (revenue total)
Determination of trustee re surplus income
(3) The trustee shall, having regard to the applicable standards and to the personal and family situation of the bankrupt, determine whether the bankrupt has surplus income. The determination must also be made
(a) whenever the trustee becomes aware of a material change in the bankrupt’s financial situation; and
(b) whenever the trustee is required to prepare a report referred to in subsection 170(1).
Duties of trustee relating to determination
(4) Whenever the trustee is required to determine whether the bankrupt has surplus income, the trustee shall
(a) if the trustee determines that there is surplus income,
(i) fix, having regard to the applicable standards, the amount that the bankrupt is required to pay to the estate of the bankrupt,
(ii) inform, in the prescribed manner, the official receiver, and every creditor who has requested such information, of the amount fixed under subparagraph (i), and
(iii) take reasonable measures to ensure that the bankrupt complies with the requirement to pay; and
(b) if the trustee determines that there is no surplus income, inform, in the prescribed manner, the official receiver, and every creditor who has requested such information, of that determination.
Official receiver recommendation
(5) If the official receiver determines that the amount required to be paid by the bankrupt is substantially not in accordance with the applicable standards, the official receiver shall recommend to the trustee and to the bankrupt an amount required to be paid that the official receiver determines is in accordance with the applicable standards.
Trustee may fix another amount
(5.1) On receipt of the official receiver’s recommendation, the trustee may fix, having regard to the applicable standards, another amount as the amount that the bankrupt is required to pay to the estate of the bankrupt, and if the trustee does so, the trustee shall
(a) inform the official receiver and every creditor, in the prescribed manner, of the amount fixed under this subsection; and
(b) take reasonable measures to ensure that the bankrupt complies with the requirement to pay.
Trustee may request mediation
(6) If the trustee and the bankrupt are not in agreement with the amount that the bankrupt is required to pay under subsection (4) or (5.1), the trustee shall, without delay, in the prescribed form, send to the official receiver a request that the matter be determined by mediation and send a copy of the request to the bankrupt.
Creditor may request mediation
(7) On a creditor’s request made within 30 days after the day on which the trustee informed the creditor of the amount fixed under subsection (4) or (5.1), the trustee shall, within five days after the day on which the 30-day period ends, send to the official receiver a request, in the prescribed form, that the matter of the amount that the bankrupt is required to pay be determined by mediation and send a copy of the request to the bankrupt and the creditor.
Mediation procedure
(8) A mediation shall be in accordance with prescribed procedures.
File
(9) Documents contained in a file on the mediation of a matter under this section form part of the records referred to in subsection 11.1(2).
Application to court to fix amount
(10) The trustee may, in any of the following circumstances — and shall apply if requested to do so by the official receiver in the circumstances referred to in paragraph (a) — apply to the court to fix, by order, in accordance with the applicable standards, and having regard to the personal and family situation of the bankrupt, the amount that the bankrupt is required to pay to the estate of the bankrupt:
(a) if the trustee has not implemented a recommendation made by the official receiver under subsection (5);
(b) if the matter submitted to mediation has not been resolved by the mediation; or
(c) if the bankrupt has failed to comply with the requirement to pay as determined under this section.
Fixing fair and reasonable remuneration in the case of related persons
(11) The court may fix an amount that is fair and reasonable
(a) as salary, wages or other remuneration for the services being performed by a bankrupt for a person employing the bankrupt, or
(b) as payment for or commission in respect of any services being performed by a bankrupt for a person,
where the person is related to the bankrupt, and the court may, by order, determine the part of the salary, wages or other remuneration, or the part of the payment or commission, that shall be paid to the trustee on the basis of the amount so fixed by the court, unless it appears to the court that the services have been performed for the benefit of the bankrupt and are not of any substantial benefit to the person for whom they were performed.
Modification of order
(12) On the application of any interested person, the court may, at any time, amend an order made under this section to take into account material changes that have occurred in the financial situation of the bankrupt.
Default by other person
(13) An order of the court made under this section may be served on a person from whom the bankrupt is entitled to receive money and, in such case,
(a) the order binds the person to pay to the estate of the bankrupt the amount fixed by the order; and
(b) if the person fails to comply with the terms of the order, the court may, on the application of the trustee, order the person to pay the trustee the amount of money that the estate of the bankrupt would have received had the person complied with the terms of the order.
Application is a proceeding
(14) For the purposes of section 38, an application referred to in subsection (10) is deemed to be a proceeding for the benefit of the estate.
Property included for enforcement purposes
(15) For the purpose of this section, a requirement that a bankrupt pay an amount to the estate is enforceable against the bankrupt’s total income.
When obligation to pay ceases
(16) If an opposition to the automatic discharge of a bankrupt individual who is required to pay an amount to the estate is filed, the bankrupt’s obligation under this section ceases on the day on which the bankrupt would have been automatically discharged had the opposition not been filed, but nothing in this subsection precludes the court from determining that the bankrupt is required to pay to the estate an amount that the court considers appropriate.