Bankruptcy Discharge

The Importance of Bankruptcy Discharge

Receiving a discharge from bankruptcy holds several crucial advantages for individuals seeking relief under the Bankruptcy and Insolvency Act. Upon discharge, you are no longer bankrupt, allowing you to regain control of your financial affairs. Additionally, you are no longer restricted from serving as a director of a corporation under provincial law. Furthermore, the countdown begins for the credit bureau to clear your record of bankruptcy, typically after a six-year period.

It is important to note that while bankruptcy discharge relieves you of most debts, certain obligations remain exempt. These include fines imposed by the court, debts acquired through misrepresentation, stolen money, child support and alimony payments, sexual assault or intentional harm awards, and certain student loans.

Requirements for Obtaining Discharge

To obtain a discharge from bankruptcy, you must fulfill several obligations as outlined by the Bankruptcy and Insolvency Act. These requirements include:

1. Making all required payments: Throughout the bankruptcy process, you are required to make payments as determined by the Superintendent’s guidelines.

2. Surrendering assigned property: Your LIT will guide you in handing over any assigned assets, ensuring they are properly accounted for and distributed among your creditors.

3. Attending credit counselling sessions: Attendance at two mandatory credit counselling sessions is mandatory to educate and equip you with the necessary financial knowledge and skills.

4. Participating in meetings and hearings: Depending on the specifics of your case, you may be required to attend meetings of creditors, examinations, or court hearings as determined by your LIT.

It is crucial to complete these duties within the specified timeframes. Failure to do so may result in delays or opposition to your discharge.

Timeline for Bankruptcy Discharge

The timeline for obtaining a discharge from bankruptcy varies based on individual circumstances. For a first-time bankrupt without surplus income, an automatic discharge is typically granted after nine months. However, if you are subject to the surplus income penalty, you will be required to contribute surplus income payments for a total of 21 months. Longer bankruptcy periods apply to second and third bankruptcies.

Opposition to Bankruptcy Discharge

While the majority of Canadian bankruptcies result in an automatic discharge, there are instances where opposition to discharge may arise. Creditors, the Superintendent of Bankruptcy, or even your LIT may oppose your discharge based on specific circumstances. Common reasons for opposition include:

1. Failure to pay required surplus income: If you have not met the agreed-upon surplus income payments, opposition to discharge may occur.

2. Failure to explore viable alternatives: If it is believed that you could have pursued a viable consumer proposal instead of bankruptcy, opposition may arise.

3. Non-compliance with counselling sessions: Refusal or neglect to attend required credit counselling sessions may lead to opposition.

4. Unusual or excessive transactions: Creditors may object to your discharge if they suspect fraudulent behavior or excessive transactions prior to bankruptcy.

5. Bankruptcy caused by gambling: If your bankruptcy was primarily caused by gambling, opposition to discharge may be raised.

6. Failure to cooperate during examination: If you refuse to respond truthfully during an examination as a bankrupt, opposition to discharge may occur.

In the event that opposition arises, your LIT will arrange a court hearing to address the concerns. It is advisable to consult with a bankruptcy lawyer to guide you through this process and ensure your rights are protected.