FAQ

Payments From Income and Reporting To Trustee During Bankruptcy

Do I have to make payments to my Trustee?

In most instances Trustees require payment from you to cover the costs of administering your Bankruptcy. Most Trustees will accept monthly payments from you.

The federal government provides guidelines that assist a Trustee in determining if an individual has “surplus income.” At least one half of any surplus income is payable to the Trustee during the period of Bankruptcy.

The surplus income payments are based on standards established by the Superintendent of Bankruptcy. The standards are based on family size. One-half of any income over the standard must be paid to the Trustee.

*The standard is based on net income after deducting income tax, CPP, EI and non-discretionary expenses such as childcare, maintenance payments, employment and medical expenses.

How many months do I have to make payments to the Trustee?

Payments must be made during the nine months that you are bankrupt. If during that period you have significant income above the guidelines, it is possible that a creditor or the Office of Superintendent of Bankruptcy will object to your discharge and ask that you be required to continue payments for a longer period. Most people are discharged after only nine payments.

Our firm advises your creditors that we will not be asking for an extension of payments if there is surplus income. If your creditors do not object, and if the Office of the Superintendent does not object, our firm will not be objecting and your contribution will be limited to nine months.

What reports do I have to file with the Trustee?

We require that you file eight monthly statements starting the first full month following your bankruptcy. If your family net income is above the Standard set by the Superintendent of Bankruptcy during the eight month period we will calculate the surplus payment required for the ninth month on the average surplus income reported during the eight months that you file statements.

The purpose behind the statements is to confirm your net family income. This is so that we can ensure that the payments above the Standard set by the Superintendent of Bankruptcy are paid and to ensure that you are starting to develop details of how you spend your family net income on a monthly basis. The expenditure information will provide you with historic information so that you can develop a financial plan following your bankruptcy.

A very large part of getting on with your finances after bankruptcy will be developing plans from these statements as to how you want to spend your family income. A simple plan might be to save what you have been paying the Trustee so that you can build up an emergency fund to cover unanticipated expenses.

What is involved with the monthly financial statements that have to be filed with the Trustee?

When you file for bankruptcy you have to report your net family income to the Trustee on a monthly basis. The forms also indicate where you are spending your income. The history of expenditures is important because it will provide you with a history of your living costs calculated on a cash basis.

Once you file for bankruptcy, you do not have to make payments to your unsecured creditors. However you have to make payments to your Trustee from surplus income.

When are the monthly statements of income and expense due?

The monthly statements should be submitted before the eighth day of the following month. Statements can be sent by mail or by fax.
Failure to submit statements could result in an objection to your discharge and could delay your release from bankruptcy and your debts.

Can I buy new assets during bankruptcy?

Technically, as long as you are making the payments required by the Superintendent of Bankruptcy, you are meeting your commitments under the Bankruptcy and Insolvency Act.

If you demonstrate to the Court and the creditors that you can cover your living costs and purchase luxury items, you run the risk that if one of your creditors will object and the Court will require you to pay more to the creditors by conditional order because you have demonstrated that you have the ability to do so.

When you are bankrupt, you should always remember that your creditors can request copies of the statements that you file with your Trustee. Your creditors can object and ask that you pay more to your creditors.

Remember that as a Bankrupt, you cannot get new credit without advising your creditors that you are bankrupt.