Surplus Income in Canadian Bankruptcy: 2025 Thresholds & Payment Rules

Surplus income is the single biggest cost driver in Canadian bankruptcy. If your net household income exceeds the federal threshold by more than $200 per month, you pay 50% of the excess to your trustee and your bankruptcy extends from 9 months to 21 months. For a single person in 2025, the threshold is $2,666 per month under OSB Directive 11R2. Every dollar above that line costs you real money.

This payment obligation is set by BIA Section 68 and enforced by your Licensed Insolvency Trustee. Understanding how surplus income works before you file determines whether bankruptcy is your cheapest option—or whether a consumer proposal saves you thousands.

How Surplus Income Works in Bankruptcy

The Office of the Superintendent of Bankruptcy sets income thresholds each year based on Statistics Canada’s Low Income Cut-Offs. These thresholds represent what the government considers a reasonable standard of living for your family size. If your net income exceeds the threshold, you have surplus income.

Here’s the formula:

Net Family Income − OSB Threshold = Surplus Amount × 50% = Your Monthly Payment

Your trustee collects income and expense information from you every month during bankruptcy. You submit pay stubs, bank statements, and receipts for allowable deductions. At month 7, the trustee averages your income over the first 7 months to determine whether surplus income triggers an automatic extension of your bankruptcy.

If your average surplus exceeds $200 per month, two things happen. First, you pay 50% of the surplus to the trustee for the duration of your bankruptcy. Second, your bankruptcy extends from 9 months to 21 months for a first-time filer, or from 24 months to 36 months for a second-time filer. That $200 threshold is a hard line—$199 means no payment and a 9-month discharge. $201 means 21 months and mandatory payments.

The trustee reports your surplus income to the OSB and your creditors. If creditors believe your reported income is inaccurate, they can oppose your discharge in court. Monthly reporting isn’t optional—missing reports can delay your discharge indefinitely.

2025 Surplus Income Thresholds by Family Size

The OSB publishes updated thresholds annually under Directive 11R2-2025. These numbers are net monthly income limits after tax deductions, CPP, and EI.

Family size includes you, your spouse or common-law partner, and all dependents living in your household. A single parent with two children counts as a 3-person household with a $4,080 monthly threshold. A couple with no children uses the 2-person threshold of $3,318.

These thresholds apply to total family unit income—not just the bankrupt person’s income. Your spouse’s earnings factor into the calculation even though they aren’t filing bankruptcy. This catches many filers off guard.

Calculating Your Surplus Income Payment

The calculation looks straightforward on paper, but the details matter. Let’s walk through three real scenarios.

Scenario 1: Priya in Brampton, single, no dependents

Priya earns $3,800 net per month as an administrative coordinator. She has no dependents and files a first-time bankruptcy.

• Net income: $3,800
• Threshold (1 person): $2,666
• Surplus: $3,800 − $2,666 = $1,134
• Monthly payment: $1,134 × 50% = $567/month
• Duration: 21 months (surplus exceeds $200)
• Total surplus paid: $567 × 21 = $11,907

That $11,907 comes on top of base bankruptcy costs including trustee fees and counselling sessions.

Scenario 2: Joel and Megan in Red Deer, married, two kids

Joel files bankruptcy. He earns $4,200 net per month. Megan works part-time earning $1,500 net. They have two children. Family size is 4.

• Combined net income: $4,200 + $1,500 = $5,700
• Threshold (4 persons): $4,953
• Surplus: $5,700 − $4,953 = $747
• Monthly payment: $747 × 50% = $374/month
• Duration: 21 months
• Total surplus paid: $374 × 21 = $7,854

Megan’s $1,500 part-time income pushes them over the threshold. Without her income counted, Joel alone at $4,200 would fall below the 4-person threshold of $4,953.

Scenario 3: Dominic in Gatineau, single, low income

Dominic earns $2,800 net per month working in a warehouse. He has no dependents.

• Net income: $2,800
• Threshold (1 person): $2,666
• Surplus: $2,800 − $2,666 = $134
• Monthly payment: $0 (surplus under $200)
• Duration: 9 months
• Total surplus paid: $0

Dominic’s $134 surplus falls below the $200 trigger. He pays only base trustee fees over 9 months and gets a standard discharge. The difference between $2,800 and $2,866 in monthly income is the difference between paying nothing and paying thousands.

How Surplus Income Extends Your Bankruptcy

The extension rules are automatic. Your trustee doesn’t choose whether to extend your bankruptcy—the surplus income calculation dictates the timeline.

At month 7, the trustee calculates your average monthly surplus over the first 7 months. If that average exceeds $200, the extension kicks in automatically. This means a temporary spike in income—overtime pay, a bonus, or a short-term contract—can push your average over the line.

The 7-month averaging works both ways. If your income drops during bankruptcy due to a layoff or reduced hours, the lower months bring your average down. Report every income change to your trustee immediately. A job loss in month 4 could pull your average surplus below $200 and keep you on the 9-month track.

If you disagree with your surplus income calculation, you can apply to the court for mediation. The trustee, you, and the creditors present arguments, and a mediator or registrar decides the appropriate payment. This is rare but available when circumstances are genuinely unusual.

Learn more about the full bankruptcy filing process including discharge requirements and timelines.

What Counts as Income (and What Doesn’t)

Surplus income includes almost every dollar that enters your household. The OSB casts a wide net.

Income that counts:

• Employment income (gross minus mandatory deductions)
• Self-employment and freelance earnings
• Employment Insurance benefits
• Pension income (CPP, OAS, employer pensions)
• Rental income
• Investment income and dividends
• Workers’ compensation benefits
• Spousal support received
• Social assistance (in most provinces)

Income that does NOT count:

• Canada Child Benefit (CCB)
• GST/HST credit

Allowable deductions from income:

• Child support payments you make
• Spousal support payments you make
• Childcare expenses (daycare, after-school care)
• Medical and dental expenses not covered by insurance
• Court-imposed fines and penalties

Your spouse’s income matters. BIA Section 68 requires the surplus calculation to use family unit income, not just the bankrupt person’s earnings. If your non-bankrupt spouse refuses to disclose their income to the trustee, the applicable threshold drops to 50% of the standard amount. For a 2-person household, that means your threshold falls from $3,318 to $1,659—nearly guaranteeing high surplus payments.

This spouse income rule makes bankruptcy particularly expensive for households where one partner earns significantly above the threshold. If your spouse earns $6,000 per month and you earn $3,000, your combined $9,000 far exceeds the 2-person threshold of $3,318. In these situations, a consumer proposal almost always costs less.

Review what happens when you file bankruptcy for the full list of obligations during your bankruptcy period.

Surplus Income vs Consumer Proposal: Fixed Payments

Surplus income is the main reason 78.9% of Canadians filing insolvency choose consumer proposals over bankruptcy. Here’s why.

In bankruptcy, your payment changes with your income. Get a raise, pick up overtime, or receive a bonus—your surplus payment increases. Your trustee recalculates every month based on actual income. You cannot budget reliably because the amount shifts constantly.

In a consumer proposal, your payment is fixed the day your creditors accept it. Earn more money next year? Your payment stays the same. Get a promotion? Same payment. Your income is irrelevant once the proposal is accepted.

Consider Priya from the earlier example. Her bankruptcy surplus costs $11,907 over 21 months. If she gets a raise during that period, it costs more. A consumer proposal for Priya might offer creditors $15,000 paid over 48 months at $313 per month—fixed, predictable, and she keeps all her assets.

For Joel and Megan, their $7,854 surplus payment could increase if either spouse earns more. A consumer proposal eliminates that risk entirely. Use the consumer proposal calculator to estimate what your fixed payments would look like.

Consumer proposals also avoid the monthly income reporting requirement. No pay stubs to submit, no receipts to track, no risk of a creditor opposing your discharge based on income disputes.

If surplus income makes bankruptcy expensive in your situation, talk to a Licensed Insolvency Trustee about whether a consumer proposal costs less overall. The initial consultation is free and includes a personalized cost comparison.

Bottom Line

Surplus income is mandatory in bankruptcy—there’s no way around it once you file. If your net family income exceeds the OSB threshold for your household size by more than $200 per month, you pay 50% of the excess for 21 months instead of 9. The 2025 threshold for a single person is $2,666 per month.

Before filing, get your exact surplus calculation from a Licensed Insolvency Trustee. Bring recent pay stubs for everyone in your household, your spouse’s income information, and receipts for deductible expenses. The trustee will calculate your surplus, compare your total bankruptcy cost to a consumer proposal, and recommend the option that eliminates your debt for the least money.

If surplus income makes bankruptcy the more expensive path, a consumer proposal locks in a fixed payment that never increases—regardless of what you earn.