Surplus income in a Canadian bankruptcy: the 2026 standards and the 50% rule
How surplus income works in a Canadian bankruptcy under OSB Directive 11R2-2026, the 2026 Superintendent's standards, the $200 threshold and how it extends the bankruptcy.
In a Canadian bankruptcy, surplus income is the part of your household's monthly available income above the Superintendent's standard for a family of your size. If it is $200 a month or more, you must pay 50% of it to your bankruptcy estate, and a first bankruptcy lasts 21 months instead of 9. For 2026 the standards are set by OSB Directive No. 11R2-2026, issued on 27 March 2026; its Appendix A sets $2,716 a month for one person, $3,381 for two, $4,157 for three and $5,047 for four, rising to $7,188 for seven or more.
Part of the consumer proposal vs bankruptcy overview. General information, not legal advice.
Where the rule comes from
Section 68 of the Bankruptcy and Insolvency Act requires the Superintendent to set standards for determining surplus income, and the trustee to apply them. The Superintendent does this through Directive 11R2, reissued each year with new figures. The 2026 standards are derived from Statistics Canada's before-tax low income cut-offs for urban areas of 500,000 people or more, updated by a 2.16% adjustment for expected 2026 inflation, according to the directive.
| Household size | 2026 monthly standard |
|---|---|
| 1 person | $2,716 |
| 2 persons | $3,381 |
| 3 persons | $4,157 |
| 4 persons | $5,047 |
| 5 persons | $5,724 |
| 6 persons | $6,456 |
| 7 or more | $7,188 |
Because the figures change every year, always check the directive in force for the months you are bankrupt. A bankruptcy that spans two calendar years uses each year's standard for its months.
How surplus income is calculated
- Total monthly net income. Start with the bankrupt's monthly income after payroll deductions (income tax, CPP or QPP, EI, mandatory pension contributions, union dues). Include employment, self-employment, pension, EI, rental and most other income.
- Subtract non-discretionary expenses. These include court-ordered or agreed child and spousal support, child care needed to work, medical expenses not covered by insurance, fines or penalties imposed by a court, and costs required as a condition of employment. Rent, groceries and car payments are not deducted: they are what the standard is meant to cover.
- Add other household income. The calculation looks at the family unit: people who live with you and benefit from or contribute to household expenses.
- Subtract the standard for the number of people in the family unit.
- Apply the family situation adjustment. If other members contribute income, the surplus is scaled to your share of the household's available income.
- Apply the threshold. Under $200: nothing to pay. $200 or more: pay 50%.
The directive's own family example
Directive 11R2-2026 includes this example, which uses official 2026 figures:
| Step | Amount |
|---|---|
| Bankrupt's available monthly income | $3,300 |
| Spouse's available monthly income | $1,000 |
| Family unit's available income | $4,300 |
| 2026 standard for 2 persons | $3,381 |
| Total monthly surplus income | $919 |
| Bankrupt's share: $3,300 ÷ $4,300 = 76.74% | $919 × 76.74% = $705.24 |
| Payment: 50% | $352.62 a month |
A step-by-step version with a self-employed bankrupt and irregular income is in the surplus income calculation example, and the surplus income estimator does the last step for you.
How surplus income changes the bankruptcy
| First bankruptcy | Second bankruptcy | |
|---|---|---|
| No surplus income | Discharged after 9 months | 24 months |
| Surplus income | 21 months | 36 months |
Illustrative example. A single bankrupt with available income of $3,400 has $684 of surplus income. She pays $342 a month. Over 21 months that is about $7,182, assuming her income stays the same. A consumer proposal with a similar or lower total, paid over a longer period, may then be worth comparing; see consumer proposal rules.
This is why income is often the deciding factor between bankruptcy and a proposal. Someone whose income is well above the standard may pay a significant sum in a bankruptcy anyway, while keeping no more of their assets.
Irregular and changing income
- Monthly reporting. You give the trustee an income and expense statement every month, with pay stubs.
- Averaging. The directive allows the trustee to use average monthly income over the period for people with variable income, such as seasonal or commissioned workers, and to adjust the payments up or down.
- Changes. If your income drops, the required payment drops; if it rises, payments start or increase. Tell the trustee promptly.
- Disputes. If you disagree with the trustee's calculation, you or a creditor can ask the OSB to mediate; if mediation fails, the trustee can ask the court to set the amount.
Common mistakes
- Counting rent or car payments as deductions. They are covered by the standard, so they do not reduce surplus income.
- Forgetting household income. A partner's income counts in the family unit even if they are not bankrupt.
- Quitting work or reducing hours to avoid surplus income. Trustees and creditors can oppose the discharge, and courts take a dim view of it.
- Stopping payments. Unpaid surplus income is a common ground for opposing discharge; see bankruptcy discharge.
When to get advice
If your income is close to the standard, small changes matter. Ask your trustee to run the calculation with your actual pay stubs before you choose between bankruptcy and a proposal. If you are self-employed, bring business income and expense records.
Frequently asked questions
Does surplus income apply in a consumer proposal?
No. A consumer proposal is a fixed offer you choose, though creditors will compare it with what surplus income would yield in a bankruptcy.
Are tax refunds included in surplus income?
No. Refunds for the year of bankruptcy and earlier years go to the estate separately. Refunds for later years generally do not.
Do child benefits count?
The directive treats some government payments for children separately. Ask your trustee how the Canada Child Benefit and provincial benefits are handled in your case.
What if I live with roommates?
Roommates who simply split rent are not normally part of the family unit. People who share household finances may be. The trustee decides based on the directive's definition.
Sources
- Office of the Superintendent of Bankruptcy — Directive No. 11R2-2026, Surplus Income (directives and circulars)
- Justice Laws Website — BIA s. 68 and s. 168.1
- Statistics Canada — low income cut-offs used as the basis of the standards
