Discharge From Bankruptcy:
Getting Discharged From Bankruptcy
is What Eliminates Your Debts
Filing for bankruptcy is a significant step towards resolving overwhelming debt. However, the process is not complete until you obtain your bankruptcy discharge. In this comprehensive guide, we will delve into the intricacies of bankruptcy discharge in Canada, exploring its meaning, requirements, potential opposition, and the implications it has on your financial future.
What is Bankruptcy Discharge?
At its core, a bankruptcy discharge signifies the final stage of the bankruptcy process in Canada. Once you have fulfilled all the necessary obligations, your Licensed Insolvency Trustee (LIT) will issue your certificate of discharge. This discharge releases you from all obligations to repay debts included in your bankruptcy filing, providing you with a fresh start.
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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:
Making all required payments: Throughout the bankruptcy process, you are required to make payments as determined by the Superintendent’s guidelines.
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.
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.
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:
Failure to pay required surplus income: If you have not met the agreed-upon surplus income payments, opposition to discharge may occur.
Failure to explore viable alternatives: If it is believed that you could have pursued a viable consumer proposal instead of bankruptcy, opposition may arise.
Non-compliance with counseling sessions: Refusal or neglect to attend required credit counseling sessions may lead to opposition.
Unusual or excessive transactions: Creditors may object to your discharge if they suspect fraudulent behavior or excessive transactions prior to bankruptcy.
Bankruptcy caused by gambling: If your bankruptcy was primarily caused by gambling, opposition to discharge may be raised.
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.
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Types of Bankruptcy Discharge
Depending on your circumstances, various types of bankruptcy discharge may be granted. These include:
Automatic Discharge: The most common type of discharge, an automatic discharge is granted when you have fulfilled all obligations and no objections have been raised. No court hearing is required, and you are released from all debts included in the bankruptcy.
Order of Absolute Discharge: In cases where a court hearing is necessary, and you have fulfilled all duties, the court may issue an Order of Absolute Discharge. This signifies that you are no longer bankrupt.
Order of Conditional Discharge: The court may impose specific conditions that must be met before granting a discharge. These conditions can include additional payments or completion of outstanding duties.
Order of Suspended Bankruptcy Discharge: In certain situations, the court may delay the discharge due to breaches of duties or ongoing investigations. This type of discharge is temporarily suspended until a specified date.
Discharge Refused: Although rare, the court has the authority to refuse a discharge from bankruptcy. In such cases, you remain bankrupt and are still liable for your debts.
Life After Bankruptcy Discharge
Once you have obtained your discharge from bankruptcy, you have the opportunity to rebuild your financial life and creditworthiness. However, it is crucial to approach this phase with caution and responsible financial habits. Consider the following steps to ensure a successful post-bankruptcy journey:
Review your credit report: After discharge, review your credit report to ensure the accuracy of information related to your bankruptcy and discharged debts.
Rebuilding credit: Begin rebuilding your credit by applying for a secured credit card. This will allow you to establish a positive credit history by making regular payments and keeping your balances low.
Budgeting and financial management: Create a realistic budget to manage your finances effectively. Track your expenses, prioritize savings, and ensure that you do not spend more than you earn.
Seek financial education: Take advantage of the financial education you received during your credit counseling sessions. Educate yourself on responsible financial practices and seek guidance from reputable sources to avoid falling into debt again.
Consult with professionals: If you require further assistance or have specific concerns, consult with a licensed insolvency trustee, financial advisor, or credit counselor. They can provide personalized advice to help you navigate your financial journey successfully.
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Bankruptcy discharge is the final step towards achieving financial relief and a fresh start. By fulfilling your obligations and obtaining your discharge, you can leave the burden of overwhelming debts behind. However, it is essential to approach post-bankruptcy life with responsibility, focusing on rebuilding credit, managing finances, and seeking professional guidance when needed. By doing so, you can pave the way for a brighter financial future.