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What are surplus income payments?
Your household income is usually your partner’s income plus your income. Surplus income is the amount of money your household makes that is more than the government’s guideline. The guideline is what the government says a family with your income and number of dependents should need to live.
If you file for bankruptcy and your family income is above the guideline, you will need to make surplus income payments to the trustee. These payments will continue as long as your income is above the guideline while you are bankrupt. Your surplus income payment is usually half of your family income over the guidelines.
If you have surplus income and it is your first bankruptcy, you will have to make those payments for 21 months. If it is your second bankruptcy, you will have to make those payments for 36 months.
Your entire family’s income is used to calculate your surplus income payment. This includes your spouse or partner’s income, as well as any other adult who is contributing towards a household income. How much money you are allowed to keep depends how many people are in your family. “Family” includes anyone who is part of your family and lives in your home.
Your trustee will also look at how much of the family income you earn by yourself. For example, if you earn 40% of the household income, then you would only have to pay 40% of the surplus income payment calculated by your trustee.
Surplus income payments are paid to your trustee. Your trustee uses that money to repay your creditors. The amount of your surplus income payment can change if your income changes.
If you do not make your surplus income payments in full to the trustee, you are not likely to get an automatic discharge to end your bankruptcy. Instead, you will probably have to go to court. The court will then decide if they will discharge your bankruptcy, or if you must stay bankrupt longer.
You must always pay off all the surplus income you owe before you are discharged.
You may also be able to use the bankruptcy mediation process. You can use this if you don’t think your surplus income calculation is correct, or if you don’t think you can make the payments.