How to calculate bankruptcy surplus income: a step-by-step 2026 example
A worked surplus income calculation for a Canadian bankruptcy using 2026 OSB standards, with irregular self-employed income, a partner's earnings and support payments.
To calculate surplus income in a Canadian bankruptcy, take your average monthly net income, subtract non-discretionary expenses such as support you pay and necessary medical costs, add the available income of others in your family unit, subtract the 2026 Superintendent's standard for your household size, scale the result to your share of household income, and pay 50% if the surplus is $200 or more. In the illustrative example below, a self-employed bankrupt living with a partner ends up paying about $260 a month, and because there is a surplus his first bankruptcy lasts 21 months, not 9.
Part of the debt relief worked examples. The rules come from OSB Directive No. 11R2-2026; the household is invented. Not financial or legal advice.
Step 0: the household
Dev is a self-employed renovation contractor in Manitoba. He lives with his partner, Ana, who works part-time. He pays court-ordered child support for a child from a previous relationship who lives with the other parent.
| Item | Amount (monthly) |
|---|---|
| Dev's net self-employment income, last six months | $4,200, $2,800, $3,900, $3,500, $3,100, $4,100 |
| Child support Dev pays under a court order | $400 |
| Dev's prescription costs not covered by insurance | $50 |
| Ana's available net income | $900 |
| Household size for the standard | 2 persons |
Step 1: average monthly net income
Self-employment income goes up and down, so the trustee works with an average. Here: ($4,200 + $2,800 + $3,900 + $3,500 + $3,100 + $4,100) ÷ 6 = $3,600.
For a self-employed bankrupt, net income means income after the business expenses needed to earn it and after income tax and CPP contributions, which the trustee estimates if they are not withheld at source. Keep receipts: the trustee will ask for them.
Step 2: subtract non-discretionary expenses
The directive allows deductions for expenses such as:
- court-ordered or written-agreement child and spousal support paid;
- child care required to earn income;
- medical expenses not covered by insurance;
- fines or penalties imposed by a court;
- expenses required as a condition of employment.
The directive's full list is longer and more precise; your trustee applies it line by line.
Dev: $3,600 − $400 support − $50 medical = $3,150 of available monthly income.
Rent, food, car payments, phone and insurance are not deducted; the standard is meant to cover them.
Step 3: add the family unit's income
Ana lives with Dev and contributes to household expenses, so she is part of the family unit. Her available income is $900.
Family unit's available monthly income: $3,150 + $900 = $4,050.
Step 4: subtract the 2026 standard
The 2026 standard for two persons is $3,381 (Directive 11R2-2026).
Total monthly surplus income: $4,050 − $3,381 = $669.
Step 5: family situation adjustment
Dev only pays on his share. His share of the family's available income is $3,150 ÷ $4,050 = 77.78%.
$669 × 77.78% = $520.33.
Step 6: threshold and 50%
The surplus is above $200, so the directive requires 50%:
$520.33 × 50% = $260.17 a month.
| Step | Result |
|---|---|
| Average net income | $3,600 |
| Available income after non-discretionary expenses | $3,150 |
| Family unit's available income | $4,050 |
| 2026 standard (2 persons) | $3,381 |
| Total surplus | $669 |
| Dev's share (77.78%) | $520.33 |
| Monthly payment (50%) | $260.17 |
Because Dev has to pay surplus income, his first bankruptcy lasts 21 months (BIA s. 168.1). If the average held, the total would be about $260.17 × 21 = $5,463.50. The surplus income estimator does step 6 for any figure.
What changes the result
| Change | Effect |
|---|---|
| Ana's income rises to $1,400 | Family income $4,550; surplus $1,169; Dev's share 69.23% = $809.31; payment about $404.65 |
| Dev's average drops to $3,000 | Available $2,550; family $3,450; surplus $69; under $200, so no payment |
| Ana moves out | Standard becomes $2,716 for one; surplus $3,150 − $2,716 = $434; payment $217 |
| Dev stops paying the court-ordered support | No deduction allowed for unpaid support, and arrears survive the bankruptcy |
Each change is reported in the monthly income and expense statement, and the trustee recalculates. Where income is irregular, the directive lets the trustee adjust based on average income over the bankruptcy, so payments made in good months may be balanced against lean ones.
Single-person quick checks
- Available income $2,950: surplus $2,950 − $2,716 = $234. Over $200, so the payment is 50% = $117.
- Available income $2,900: surplus $184. Under $200: nothing to pay, and a first bankruptcy can end after 9 months.
- Available income $3,300: surplus $584; payment $292.
Note the cliff around $200: a raise of a few dollars can turn a 9-month bankruptcy into a 21-month one. Ask your trustee how that is handled if your income is close to the line.
Mistakes to avoid
- Using gross income instead of net income.
- Deducting voluntary support or debts you choose to pay instead of court-ordered or written-agreement support.
- Leaving out a partner's income, which can lead to an opposition to discharge.
- Not reporting cash or side income.
- Assuming last year's standards apply: they change each year; see the 2026 standards.
Related: bring the pay stubs and expense records listed in the first meeting checklist, and remember that monthly reporting is one of your duties during bankruptcy.
Frequently asked questions
Who decides who is in my "family unit"?
The trustee applies the directive's definition: people who live with you and benefit from or contribute to household income or expenses. Ask how your situation is treated before filing.
What if I disagree with the trustee?
You can ask the Official Receiver to mediate. If that fails, the trustee can apply to the court to set the amount.
Does a consumer proposal use the same calculation?
No, but creditors and trustees use it to estimate what a bankruptcy would yield, which sets the floor for an acceptable proposal; see sizing a proposal offer.
Sources
- Office of the Superintendent of Bankruptcy — Directive No. 11R2-2026 (Surplus Income), Appendices A and B
- Justice Laws Website — BIA s. 68 (surplus income) and s. 168.1 (automatic discharge)
- Canada Revenue Agency — self-employment income, tax and CPP contributions
