Did you know that when you file for a bankruptcy, it’s not just your assets that you may have to sell? In addition to having to sell assets like second properties, investments outside of retirement savings, or equity in vehicles over $6,600, you could also wind up paying money due to surplus income.
Surplus Income in a Bankruptcy in Etobicoke
It’s important to know that the bankruptcy process is far from instant. You probably know that bankruptcy will remain on your credit history for six to seven years from the date of your discharge (the first time), but bankruptcy itself also takes nine months and one day until you are discharged.
However, if during those nine months your average monthly income exceeds the surplus income limit, this will result in an extension to the time you are in bankruptcy and further payments that you need to make to your bankruptcy trustee, now called a Licensed Insolvency Trustee, to be distributed to your creditors.
Surplus income limits change annually to reflect inflation and they are different depending on the size of your household. These are the monthly surplus income limits for 2018:
Number of Household Members Surplus Income Limit
1 $2,152
2 $2,679
3 $3,923
4 $3,998
5 $4,535
6 $5,114
7 $5,694
How Surplus Income Works in Bankruptcy
Going over the surplus income limit does not mean you have to hand over everything. Your income over your surplus income limit is charged at a rate of 50 percent, so you pay half of your surplus income to your bankruptcy trustee. The bankruptcy trustee at David Sklar & Associates disburses that income to your creditors, much like your assets. Your surplus income is calculated after tax.
Bankruptcy in Etobicoke
All in all, bankruptcy in Etobicoke should help you get back on your feet. Bankruptcy is meant to be a reformative measure, not punitive. You can rebuild your credit and even qualify for a mortgage down the line if you’re smart about using credit. Your spouse’s credit won’t be affected and your job will not be affected in most cases. In fact, there’s no reason for your employer to even find out unless there is a garnish on your wages.
Bankruptcy can be a valuable way to get out of debt. But there are also alternative options to bankruptcy that are easier to manage and have a smaller impact on your finances. The most popular of these is a consumer proposal. Your bankruptcy trustee at David Sklar & Associates can help you decide between a consumer proposal and filing for bankruptcy in Etobicoke. The choice is yours; we help you figure out the best way forward.
When you come into David Sklar Etobicoke, they will discuss your options with you, including alternatives. They will also answer any questions you have such as questions regarding surplus income. The first step toward becoming debt free is a call to a bankruptcy trustee.
