What Happens if my Income Increases in a Consumer Proposal?

This is an excellent question so let me explain how this works.

First, let’s start with how a bankruptcy works in this situation.  If you file personal bankruptcy, your income is measured each month.  If your income is above certain levels, you may actually have to pay money into your bankruptcy.    For example, if you are a single person, and your monthly net income exceeds $1926, then you will have to pay 50 cents of every dollar over that amount into your bankruptcy, in addition to the fee the Trustee charges you, as well as losing your tax refund.

The risk then is that if your income goes up in a bankruptcy, your creditors stand to gain from that, possibly just as much as you.  I say this to people all the time in our consumer proposal office in London, that if you file bankruptcy and your income improves, you won’t see all of the benefit of that.  Not only that, but this ‘surplus’ as the government calls it, can actually extend your time in bankruptcy by 12 months.

In a consumer proposal, once the deal is done, that is the payment.  You have no further obligation to report income and any wage increases, bonuses, or overtime are yours to do with as you see fit.  Certainly, it might be wiser to pay your proposal off more quickly, but you don’t have to if you have a better use for the money.

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