Directive No. 11R2-2023
Surplus Income

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Directive No. 11R2-2023

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Date:

To: Licensed Insolvency Trustees

Subject: Directive No. 11R2-2023, Surplus Income

Please note that Directive No. 11R2, Appendix A, has been updated to reflect the Superintendent’s Standards for 2023. The examples in Appendix B of the Directive have also been revised.

Att.

Elisabeth Lang
Superintendent of Bankruptcy


Issued:

(Directive No.  11R2-2023 supersedes Directive No.  11R2-2022R, issued on

Interpretation

  1. In this Directive,
    • "Act" means the Bankruptcy and Insolvency Act;
    • "Licensed Insolvency Trustee (LIT)" means a trustee or licensed trustee, as defined in section 2 of the Act and an administrator of consumer proposals as defined in section 66.11 of the Act;
    • "spouse" means either of two persons who
      • (a) are married to each other, or
      • (b) are not married to each other and to whom at least one of the following situations applies:
        • (i) have been living together in a conjugal relationship for at least 12 continuous months;
        • (ii) have been living together in a conjugal relationship and
          • a child was born of their union;
          • have, together, adopted a child; or
          • one of them has adopted a child of the other;
    • "Superintendent's standards" refers to the table in Appendix A of this Directive;
    • "surplus income" means surplus income as defined in subsection 68(2) of the Act;
    • "total income" means total income as defined in subsection 68(2) of the Act.

Authority and Purpose

  1. This Directive is issued pursuant to the authority of paragraph 5(4)(c) and section 68 of the Act and is intended to assist the LIT in determining equitably and consistently the portion of the bankrupt's income that should be paid into the bankrupt's estate.

Sections of the Act Concerned

Sections 68, 168.1 and 172.1.

Family Unit

  1. In determining the bankrupt's personal and family situation for the purposes of subsection 68(3) of the Act, it is necessary to establish the earnings and expenses of both the bankrupt and the bankrupt's family unit. The bankrupt must disclose the earnings and expenses of each member of the family unit by providing the LIT with income and expense statements for the entire period of bankruptcy. LIT s must use their professional judgment in exercising their duty to apply due diligence when determining the bankrupt's average monthly income. The LIT 's file should clearly document the method by which he/she calculated the amount, if any, the bankrupt is required to pay to the estate. As well, the LIT may question each member of the family unit as to their earnings and expenses.
  2. For the purposes of this Directive, the bankrupt's family unit includes, in addition to the bankrupt, any persons who reside in the same household and who benefit from either the expenses incurred or income earned by the bankrupt, or who contribute to such expenses or earnings. A person who does not reside in the same household shall be considered as a member of the family unit if the person benefits from or contributes to the expenses incurred or income earned by the bankrupt.

Calculation

  1. (1) In order to apply the Superintendent's standards for determining surplus income (Appendix A), the bankrupt shall first complete the monthly income and expense statement of the family unit, including the bankrupt, in Form 65.

    (2) The family unit's total monthly income is determined by subtracting from the total of all of its members' monthly incomes the following amounts, as applicable:

    • (a) in the case of a salaried employee, minimum statutory remittances (income tax, pension and employment insurance deductions) and other mandatory deductions paid; or
    • (b) in the case of a person who is self-employed, business expenses and deductions as permitted by the Income Tax Act or similar provincial legislation, minimum statutory remittances and instalment tax payments made.

    (3) The family unit’s available monthly income is determined by subtracting from the family unit’s total monthly income the monthly non-discretionary expenses applicable to the personal and family situations of both the bankrupt and the bankrupt’s family unit:

    • (a) child support payments;
    • (b) spousal support payments;
    • (c) child care expenses;
    • (d) expenses associated with a medical condition;
    • (e) Court-imposed fines or penalties that are in the process of being paid;
    • (f) expenses permitted by the Income Tax Act (or similar provincial legislation) that are a condition of employment;
    • (g) any other debt where a stay of proceedings has been lifted by the Court, and a recourse authorized; and
    • (h) interest paid on debts that are not dischargeable in bankruptcy under paragraph 178(1)(g) of the Act.

    (4) The LIT shall verify the accuracy of the income and expense statement submitted by the bankrupt by requiring that the bankrupt provide:

    • (a) proof of income; and
    • (b) proof of payments made pursuant to paragraphs 5(2) and 5(3) above.

    (5) For the purposes of subsection 68(3) of the Act, the LIT determines whether the bankrupt has surplus income by subtracting from the family unit's available monthly income the amount that, according to the Superintendent's standards (Appendix A), corresponds to the number of persons in the family unit.

    (6) Where the bankrupt has monthly surplus income of less than $200, the bankrupt is not required to pay any amount to the bankrupt's estate under this Directive.

    (7) Subject to the family situation adjustment described in paragraph 6(1) of this Directive and subject to an adjustment to the surplus income calculation based on average monthly income described under paragraph 7 or 8 of this Directive, where the bankrupt has monthly surplus income equal to or greater than $200, the bankrupt is required to pay 50 percent of the monthly surplus income to the bankrupt's estate.

Family Situation Adjustment

  1. (1) The amount that the bankrupt is required to pay to the bankrupt's estate as determined in paragraph 5(6) or 5(7) of this Directive shall be adjusted to the same percentage as the bankrupt's portion of the family unit's available monthly income.

    (See example in Appendix B.)

    (2) Where the non-bankrupt spouse refuses or neglects to divulge his or her income or expenses, the LIT shall, for the purposes of determining surplus income, apply 50 percent of the applicable Superintendent's standards (Appendix A) corresponding to the number of persons in the family unit.

    (3) Where a person considered to be a member of the family unit as described in paragraph 4 of this Directive (other than a spouse), who is not a bankrupt, refuses or neglects to divulge his or her income and expenses, this person is deemed not to be a member of the family unit. The LIT shall describe these circumstances in Form 65, Monthly Income and Expense Statement of the Bankrupt/Debtor and the Family Unit and Information (or Amended Information) Concerning the Financial Situation of the Individual Bankrupt and, when required, in Form 82, Report of Trustee on Bankrupt's Application for Discharge.

Average monthly surplus income — bankrupts who are eligible for automatic discharge under section 168.1 of the Act

  1. (1) In addition to the requirements of subsection 68(3) of the Act, the LIT shall review the financial circumstances of a bankrupt who is eligible for an automatic discharge to determine whether the bankrupt is required to make payments under section 68 of the Act on at least the following two occasions: (1) at the outset of the file when completing Form 65; and (2) during the eighth month in the case of a first-time bankrupt and during the 23rd month in the case of a second-time bankrupt.

    (2) When reviewing the bankrupt's financial circumstances, the LIT shall calculate the bankrupt's average monthly income based on the income and expense statements. The average monthly income is to be used to determine the amount the bankrupt is required to pay to the bankrupt's estate.

    (3) If, based on the average monthly income, there is a requirement to make payments under section 68 of the Act, the bankrupt will be required to continue to make payments under section 68 for an additional 12 months before being eligible for an automatic discharge under section 168.1 of the Act. Moreover, the average monthly income is to be used to determine the amount the bankrupt is required to pay to the bankrupt's estate for the 21 or 36 months, as the case may be. If there is a further material change in the bankrupt's financial situation, the LIT shall redetermine whether the bankrupt has surplus income, but the bankrupt is not eligible for an earlier discharge, subject to an application under subsection 168.1(2) of the Act.

    (4) If, however, based on the average monthly income, there is no requirement to make payments under section 68, the bankrupt is eligible for an automatic discharge at the expiry of the 9th month / 24th month after the date of bankruptcy, as the case may be.

    (5) If the bankrupt is eligible for an automatic discharge on a date that is different from the date indicated on Form 68 or Form 69 sent by the LIT , the LIT shall immediately send an amended Form 68 or Form 69 indicating the new date on which the bankrupt will be eligible for an automatic discharge.

    (6) If the bankrupt fails to provide the LIT with the information needed to determine the average monthly income in accordance with paragraph 7(2) of this Directive, the LIT shall oppose the discharge of the bankrupt.

    (7) Subject to section 170.1 of the Act, if a bankrupt has not paid the required amount to the bankrupt's estate, the LIT shall oppose the discharge of the bankrupt.

    (8) The LIT is not required to return to the bankrupt any payments that are made to the estate under section 68 of the Act where it is determined, based on the average monthly income, that the bankrupt was required to make payments of a lesser amount or no payments under section 68.

Average monthly surplus income — bankrupts who are not eligible for automatic discharge under section 168.1 of the Act

  1. (1) In addition to the requirements of subsection 68(3) of the Act, the LIT shall review the financial circumstances of a bankrupt who is not eligible for an automatic discharge to determine whether the bankrupt is required to make payments under section 68 of the Act on at least the following two occasions: (1) at the outset of the file when completing Form 65; and (2) when completing Form 82.

    (2) When reviewing the bankrupt's financial circumstances, the LIT shall calculate the bankrupt's average monthly income based on the income and expense statements. The average monthly income is to be used to determine the amount the bankrupt is required to pay to the bankrupt's estate.

    (3) If the bankrupt fails to provide the LIT with the information needed to determine the average monthly income in accordance with paragraph 8(2) of this Directive, the LIT shall oppose the discharge of the bankrupt.

    (4) If a bankrupt has not paid the required amount to the bankrupt's estate, the LIT shall oppose the discharge of the bankrupt.

    (5) The LIT is not required to return to the bankrupt any payments that are made to the estate under section 68 of the Act where it is determined, based on the average monthly income, that the bankrupt was required to make payments of a lesser amount or no payments under section 68.

(See example in Appendix B)

Discontinuation of Payments

  1. The bankrupt's requirement to make payments under section 68 of the Act shall cease when the bankrupt is discharged, or as otherwise ordered by the Court. However, if an opposition to the automatic discharge has been filed, the bankrupt's requirement to make payments under section 68 of the Act ceases on the day on which the bankrupt would have been automatically discharged had the opposition not been filed, or as otherwise ordered by the Court.

Coming into Force

  1. This Directive comes into force on the date it is signed.

Enquiries

  1. For any questions pertaining to this Directive, please contact your local OSB office.

Elisabeth Lang
Superintendent of Bankruptcy


Appendix A

Superintendent's Standards – 2023

Superintendent's Standards - 2023
Persons S ($) Family Unit's Available Monthly Income ($)
2743 2943 3143 3343 3543 3743 3943 4143 4393 4693 4993 5293 5593 5893 6193 6493 6793 7093
1 2543 200 400 600 800 1000 1200 1400 1600 1850 2150 2450 2750 3050 3350 3650 3950 4250 4550
2 3165 0 0 0 0 378 578 778 978 1228 1528 1828 2128 2428 2728 3028 3328 3628 3928
3 3891 0 0 0 0 0 0 0 252 502 802 1102 1402 1702 2002 2302 2602 2902 3202
4 4725 0 0 0 0 0 0 0 0 0 0 268 568 868 1168 1468 1768 2068 2368
5 5359 0 0 0 0 0 0 0 0 0 0 0 0 234 534 834 1134 1434 1734
6 6044 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 449 749 1049
7+ 6729 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 364

The Superintendent's Standards ("S") are derived from the Low Income Cutoffs (LICO) released by Statistics Canada. The Superintendent uses the before-tax LICO for urban areas with 500,000 people and over. The 2023 standards are updated by applying a 3.85% adjustment to the 2022 LICO to reflect the 2023 CPI (Consumer Price Index) expectation. The amounts shown above represent the monthly total surplus income of the bankrupt over the standards, from which the surplus income payment should be calculated.


Appendix B

Example 1

Family Situation Adjustment (Family unit of two)

Bankrupt's available monthly income: $2800
Other family unit member's available monthly income: $1000
sub-line representing the total of preceding rows the 2 preceding rows
Family unit's available monthly income: $3800
Minus Superintendent's standard for a family unit of two as per Appendix A — 2023: $3165
sub-line representing the total of preceding rows preceding rows
Total monthly surplus income: $635
Family Situation Adjustment
(2800 ÷ 3,800 = 73.68%
$635 × 73.68% = $467.87)
$467.87
Payment required from bankrupt as per paragraph 5(7) of this Directive:
($467.87 × 50% = $233.94)
$233.94

Example 2

Increase in income

A single, first-time bankrupt has regular monthly income of $2000 and is not required to make payments to the estate under section 68 of the Act.

In completing Form 65, at the outset of the file:

Example 2: Increase in income
Bankrupt's available monthly income: $2000
Other family unit member's available monthly income: $0
sub-line representing the total of preceding rows preceding rows
Family unit's available monthly income: $2000
Minus Superintendent's standard for a family unit of one as per Appendix A — 2023: $2543
sub-line representing the total of preceding rows preceding rows
Total monthly surplus income: $0
Payment required from bankrupt: $0

During the fifth month of bankruptcy, the bankrupt's income increases to $4000 per month.

The LIT would average the bankrupt's monthly income in the eighth month to determine whether the bankrupt has surplus income.

Example 2: Increase in income - bankrupt's monthly income in a eighth month period
Bankrupt's total income for seven months:
$2000 × 4 months = $8000
$4000 × 3 months = $12,000
sub-line representing the total of preceding rows
Total $20,000
Bankrupt's average monthly income for seven months:
$20,000 ÷ 7 = $2857.14
Minus Superintendent's standard for a family unit of one as per Appendix A — 2023:
$2543
sub-line representing the total of preceding rows
Total average monthly surplus income: $314.14
Payment required from bankrupt as per paragraph 5(7) of this Directive:
($314.14 × 50% = $157.07)
$157.07

Given that the increase in income has resulted in a requirement to make payments under section 68, the bankrupt must pay the amount owing to the estate ($157.07 × 9 months) and the bankrupt is required to continue to make payments under section 68 for an additional 12 months ($157.07 × 12 months), subject to a further material change in the bankrupt's financial situation that results in redetermination of whether the bankrupt has surplus income, before being eligible for an automatic discharge under section 168.1 of the Act.

Example 3

Decrease in income

A single, first-time bankrupt has regular monthly income of $2800 and is required to make surplus income payments to the estate.

Example 3: Decrease in income
Bankrupt's available monthly income: $2800
Other family unit member's available monthly income: $0
sub-line representing the total of preceding rows
Family unit's available monthly income: $2800
Minus Superintendent's standard for a family unit of one as per Appendix A — 2023:
$2543
sub-line representing the total of preceding rows
Total monthly surplus income: $257
Payment required from bankrupt
as per paragraph 5(7) of this Directive:
($257 × 50% = $128.50)
$128.50

During the fifth month of bankruptcy, the bankrupt's income decreases to $1000 per month.

The LIT will average the bankrupt's monthly income in the eighth month to determine whether the bankrupt has surplus income.

Example 3: Decrease in income - bankrupt's monthly income in a eight-month period
Bankrupt's total income for seven months:
$2800 × 4 months = $11,200
$1000 × 3 months = $3000
sub-line representing the total of preceding rows
Total $14,200
Bankrupt's average monthly income for seven months:
$14,200 ÷ 7 = $2028.57
Minus Superintendent's standard for a family unit of one as per Appendix A — 2023: $2543
sub-line representing the total of preceding rows
Total monthly surplus income: $0
Payment required from bankrupt: $0

Given that the decrease in income has resulted in no further requirement to make payments under section 68, the bankrupt is no longer required to make payments under section 68, subject to a further material change in the bankrupt's financial situation that results in redetermination of whether the bankrupt has surplus income, before being eligible for an automatic discharge under section 168.1 of the Act. In accordance with paragraph 7(4) of this Directive, the bankrupt is eligible for an automatic discharge at the expiry of the ninth month.

Example 4

Irregular income

A salesperson who works on commission and receives payment on an irregular basis files for the first time an assignment in bankruptcy. During the seventh month of bankruptcy, the bankrupt receives three commissions in the amount of $5000, $4000 and $5000 for a total of $14,000. The average monthly income during the seven-month period of bankruptcy is $2000 ($14,000 ÷ 7 months = $2000) and this amount is the basis upon which to determine whether the bankrupt has surplus income according to the Superintendent's standards in place at the date of the bankruptcy and to determine the date on which the bankrupt is eligible for an automatic discharge.

Example 5

Increase in income (lump sum payment of pre-bankruptcy income)

If during the bankruptcy, the bankrupt receives a lump sum payment that represents a pre-bankruptcy income entitlement, for example, a wrongful dismissal settlement or a pay equity award, the LIT is required to determine what portion of the settlement or award is considered to be income for the purposes of section 68 of the Act. That amount then accrues to the estate for distribution to the creditors, except to the extent that it is required to meet the current needs of the bankrupt and his or her family. For greater clarity, the bankrupt is entitled to retain a sufficient amount of the payment to bring his or her income during the entire course of the bankruptcy up to the amount the LIT would normally allow the bankrupt to retain if the income were available on a periodic basis.

For example, a first-time bankrupt with regular monthly income of $1000 is not required to make monthly payments to the estate because the monthly income is below the Superintendent's standard for a family unit of one as per Appendix A. If, during the course of the bankruptcy, the bankrupt receives a wrongful dismissal award of $15 000 in the form of a lump sum payment (the full amount of which is considered to be income), the LIT determines the amount the bankrupt is required to pay to the estate in the following manner:

Example 5 - Increase in income (lump sum payment of pre-bankruptcy income)
Bankrupt's monthly income: $1000
Minus Superintendent's standard for a family unit of one as per Appendix A — 2023: $2543
sub-line representing the total of preceding rows
Total monthly surplus/shortfall: ($1543)
Bankrupt's lump sum payment: $15,000
Minus shortfall × 9 months:
($1543 × 9 = $13,887)
$13,887
sub-line representing the total of preceding rows
$1113
Portion of lump sum to accrue to estate: $1113

In this example, the bankrupt is required to pay $1113 of the lump sum award to the estate, but has no ongoing requirement to make payments under section 68 of the Act. Subject to the exceptions noted in section 168.1 of the Act, the bankrupt is eligible for an automatic discharge at the expiry of nine months after the date of bankruptcy.

However, if the bankrupt's monthly income is such that the bankrupt is required to make payments under section 68 of the Act, the LIT determines what portion of the settlement or award is considered to be income for the purposes of section 68 of the Act. That amount then accrues to the estate for distribution to the creditors. Subject to the exceptions noted in section 168.1 of the Act, the bankrupt is eligible for an automatic discharge at the expiry of 21 months after the date of bankruptcy.

Example 6

Non-bankrupt spouse refuses or neglects to divulge his or her income or expenses

In a family unit of four, where the non-bankrupt spouse refuses to divulge his or her income, the LIT , for the purposes of determining surplus income, would base the calculation on the amount of $2362.50 ($4725 × 50% = $2362.50) instead of $4725.

(Family unit of four)
Example 6 - Non-bankrupt spouse refuses or neglects to divulge his or her income or expenses
Bankrupt's available monthly income: $2600
Other family unit members' available monthly income
(spouse refuses to divulge income):
$0
sub-line representing the total of preceding rows
Family unit's available monthly income: $2600
Minus Superintendent's standard for a family unit of four as per Appendix A — 2023:
($4725 × 50% = $2362.50)
 $2362.50
sub-line representing the total of preceding rows
Total monthly surplus income: $237.50
Payment required from bankrupt as per paragraph 5(7) of this Directive:
($237.50 × 50% = $118.75)
$118.75