When you declare bankruptcy in Canada, you may be required to pay your creditors during the bankruptcy period. To ensure fairness, the Canadian government has established surplus income limits—regulations designed to balance your ability to maintain a reasonable standard of living while still contributing toward your debts.

Because the rules around surplus income can be complex, working with an experienced Licensed Insolvency Trustee can help you understand your obligations and make informed financial decisions.

At Crowe MacKay & Company Ltd, we’ve been guiding individuals and businesses through debt recovery for over 50 years. Our team provides personalized advice and practical solutions through our core services:

• Individual Options
• Business Options

This article explains surplus income, how the limits are determined, and how they can impact your bankruptcy process in 2025.

What Is Surplus Income?

When an individual files for bankruptcy under the Bankruptcy and Insolvency Act (BIA) in Canada, surplus income is one of the key calculations. In simple terms:

• You’re allowed to keep a reasonable amount of income to cover living expenses.
• If your household income (after certain deductions) exceeds a set threshold, the “extra” is considered surplus.
• To benefit your unsecured creditors, you must pay 50% of that surplus to the bankruptcy estate (via your licensed insolvency trustee, or LIT).
• The higher your income, the more you pay—and those payments may affect how long your bankruptcy lasts.
• Each year, the thresholds are set nationally (through the Office of the Superintendent of Bankruptcy); location within Canada doesn’t change the table.

In other words, the system recognizes that bankrupt individuals still need to live, but it also asks those with more capacity to contribute more to repay creditors.

How Are the Income Limits Set?

The surplus income threshold for each “family unit” is determined by the OSB. When calculating whether you have surplus income, the following steps are involved:

1. Your LIT will examine your family's monthly net income (you plus any persons living in the household who benefit from or contribute to the income/expenses).
2. Certain expenses are deducted before arriving at “available monthly income” — such as child-care costs, medical condition expenses, employment‐related deductions, support payments, court-imposed fines, etc.
3. The available monthly income is compared with the threshold for your household size (which increases with the number of dependents). You must pay surplus income if it exceeds the threshold by at least $200/month.
4. Your payment = 50% of your surplus income (after any “family situation adjustment” to account for your share of household income).
   So, while the concept is simple at its core, understanding how deductions apply requires accurate income and expense statements and sometimes professional advice.

2025 Surplus Income Limits

Here are the monthly thresholds for 2025, set by the OSB:

Example: If a family of three has a combined net monthly income of $4,500, they are $4,500 − $4,080 = $420 above the threshold. Their surplus income payment would be 50% of that: $210/month.

These updated thresholds reflect cost-of-living adjustments and were published by the OSB as part of Directive 11R2-2025.

How It Affects the Duration of Bankruptcy

Not only does surplus income affect how much you pay each month, but it also affects how long you will remain bankrupt.

• First-time bankruptcy
  • Suppose you do not exceed the threshold (i.e., your surplus income is under the $200 mark). In that case, you may be eligible for an automatic discharge after 9 months (assuming all other duties are fulfilled).
  • If your average monthly surplus income is $200 or more, your bankruptcy will be extended to 21 months.
• Second bankruptcy
  • Without surplus income: ~24 months.
  • With surplus income (average over $200/month): ~36 months
• Third or subsequent bankruptcy
  • The court determines duration, but a higher income means greater payment obligations and typically a longer term.

Thus, it’s crucial for someone considering bankruptcy to estimate not only their income during the bankruptcy period (including bonuses, overtime, etc.) but also the number of people in their household and their non-discretionary expenses — all of which affect the surplus calculation.

Finding Balance Between Debt Repayment and Daily Living

Understanding surplus income limits is a key part of the bankruptcy process in Canada. These limits ensure that while you contribute fairly toward your debts, you still have enough income to maintain a reasonable quality of life.

However, calculating and managing surplus income can be complex — especially when your earnings or expenses fluctuate.

At Crowe MacKay & Company Ltd, our Licensed Insolvency Trustees are here to guide you through every step of the process.

We’ll help you determine your surplus income obligations, explore debt relief options, and create a plan that supports your long-term financial recovery.

If you’re considering bankruptcy or want to understand your repayment responsibilities better, contact us today for a free, confidential consultation — and take the first step toward a fresh financial start.