What is an Absolute Discharge in Bankruptcy?
This is a process that releases the bankrupt person from the debts they owed at the time the bankruptcy claim was filed.
After the absolute discharge, the person is not bankrupt and they also don’t have outstanding dues.
The only debts that this person may have are:
– Court fines and penalties;
– Child or spousal support payments;
– Debts due to fraud;
When may I obtain Absolute Discharge?
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In a majority of cases, the person becomes automatically qualified for absolute discharge in bankruptcy, 9 months after they’ve filed for bankruptcy.
They must meet the following conditions to be eligible:
– This is the person’s first bankruptcy.
– The person attended 2 mandatory financial counseling sessions.
– No 3rd party is opposed to their discharge, i.e. creditors, Office of the Superintendent of Bankruptcy, etc.
The eligibility timeline increases considerably for consequent bankruptcies:
Two years or 24 months is the period for bankruptcies that do not require income payments into the estate and where the individual appears for two mandatory counselling meetings.
There are no opposing parties.
Three years or 36 months for bankruptcies that require income payments into the insolvency estate.
The other previously mentioned conditions are also applicable.
Other Forms of Bankruptcy Discharge
Your absolute discharge in bankruptcy claim may be challenged by the OSB, creditors, or a licensed insolvency trustee.
They may oppose because they are convinced that you behaved in bad faith, or didn’t meet the conditions of the bankruptcy, or you committed a breach of the terms set in the Bankruptcy and Insolvency Act.
In these situations, your case will be presented in front of the courts.
As a substitute for an absolute discharge, you may expect any of the following types of discharge:
a. Conditional Discharge – You will need to fulfill additional criteria such as making additional payments during a period before becoming eligible for absolute discharge in bankruptcy.
b. Suspended Discharge – You will be eligible for absolute discharge that will take into effect at a later date.
c. Refused Discharge – You do not get a discharge and are not able to borrow over $1,000 without informing the creditor that you’re bankrupt.
Summary of Absolute Discharge in Bankruptcy
Filing for bankruptcy is an opportunity for you to start fresh and get rid of the pressures of a financial burden.
Some of the obvious benefits of bankruptcy are:
– Eliminating stress of collections;
– Debt freedom;
– Improved financial literacy.
There are many variables that can help you achieve an absolute discharge.
The best way to reduce the timeline is to comprehend and stick to the criteria stated by the Licensed Insolvency Trustee from the start of the proceedings.
By maintaining an open line of communication about any roadblocks that you face in meeting obligations will help prevent refusal by Courts or opposition to discharge.
Keep in mind absolute discharge in bankruptcy eliminates most of the debt but not all of it!
To speak to a bankruptcy expert about getting your absolute discharge in bankruptcy, get in touch with us today.
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Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?