Question: What determines a trustee’s intention to extend bankruptcy due to “significant surplus income”
What is considered as significant income and if any surplus over $1000 requires an additional premium of .75 of each dollar over $1000 why would a bankruptcy be extended if a premium is already being paid for “significant surplus”.
Answer: You ask an excellent question, for which there is no clear answer.
Directive 11R from the Office of the Superintendent of Bankruptcy explains the calculation of surplus income. However, the Directive does not specify the time period required.
In the Ontario courts surplus income payments each month during bankruptcy of over $400 to $500 per month may be considered “significant” in some cases, and the court may therefore add additional months, and payments, to the bankruptcy. However the court will take into consideration the recommendation of the trustee, the creditors, and the situation of the bankrupt.
If you believe you are likely to have significant surplus while bankrupt it is often recommended that instead of filing bankruptcy you file a consumer proposal so that you can fix the amount of your monthly payments, and negotiate a settlement with your creditors and avoid bankruptcy.
Finally, the federal government has proposed new rules that would automatically extend a bankruptcy to a minimum of 21 months if the bankrupt has surplus income. As of today’s date (April 15, 2009) these rules have not yet come into force. More details are available about new bankruptcy laws in Canada. Your trustee can provide you with further details.