Discharge From Bankruptcy: Getting Discharged From Bankruptcy is What Eliminates Your Debts
Getting your discharge from bankruptcy is usually automatic.
In the vast majority of cases a person is discharged (released from bankruptcy) nine months after filing personal bankruptcy.
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The discharge from bankruptcy is very important to the bankrupt as it results in the following:
* The debtor is no longer bankrupt and therefore not under any more obligations under the Bankruptcy and Insolvency Act;
* The bankrupt no longer has a restriction on being a director of a corporation under provincial law;
*The countdown to when the credit bureau clears the person’s record of having gone bankrupt begins its six-year term;
Upon your bankruptcy discharge you will receive relief from all of your debts except for:
- Fines imposed by a court;
- Debts that were obtained through misrepresentation;
- Money owed for things that were stolen;
- Child support, alimony and other maintenance payments owed;
- Sexual assault or intentionally inflicting bodily harm awards the court awarded to a victim of your crime;
- Student loans in certain situations
If a person does not get a discharge from bankruptcy, the trustee will seek to be discharged, once the file has been completed.
Once the trustee is discharged, the stay of proceedings is lifted.
The debt, of course, is not erased and creditors can pursue the debtor as if he or she has never been bankrupt.
What if you did not get your Discharge from bankruptcy?
People often don’t get their discharge from bankruptcy. Perhaps their discharge was opposed.
Perhaps they didn’t fulfill their duties and the trustee could not recommend their discharge.
Perhaps because of personal issues they could not carry out their duties.
What to do?
Contact your trustee and find out why you did not get discharged and what you have to do to get your discharge.
The trustee will want a fee for reopening your file.
If you had a bad relationship with your trustee he may not want to deal with you. If this is the case you may have to retain an insolvency lawyer to go to court to get your discharge.
Some provinces have “Do it Yourself Guides”:
- Alberta—Discharge from bankruptcy
(PDF, 121 KB, 35 pages)
- British Columbia—Discharge from bankruptcy
(PDF, 2.4 MB, 32 pages)
- British Columbia—Discharge from bankruptcy with student loans
(PDF, 1.2 MB, 22 pages)
- Manitoba—Discharge from bankruptcy guidebook (PDF, 1.26 MB, 51 pages)
Reasons Why a Discharge from bankruptcy May Be Opposed and Possible Penalties
Creditors or the Superintendent of Bankruptcy may oppose the discharge of a bankrupt.
Creditors sometimes disagree with the trustee when the trustee recommends that the bankruptcy be discharged unconditionally.
The Bankruptcy and Insolvency Act gives creditors the right to oppose the discharge and appear in court to give their reasons why there should be a further penalty or paying more money, having the discharge postponed, or some other penalty.
Creditors who oppose the bankrupt’s discharge must be able to establish one or more of the facts listed in the table below.
Section 173 Facts:
Fact: Debtor was previously bankrupt or filed a proposal.
Probable penalty: If previous bankruptcy or proposal was:
– 5 – 10 years ago, discharge takes an additional 6 months;
– More than 10 years ago, discharge takes an additional 3 months
Fact: The bankrupt has not paid the payments required under the Superintendent’s guidelines.
Probable Penalty: Discharge is delayed until the funds are paid
Fact: The bankrupt could have filed a viable proposal.
Penalty: The trustee recommends that the payments required under the Superintendent’s guidelines continue for 12 more months.
Fact: The unencumbered assets are worth less than 50 percent of the unsecured debt, unless it is for reasons for which the bankrupt cannot be held responsible.
Penalty: This is a “catch all” reason for getting the matter into court, usually used by creditors and not trustees.
Fact: The bankrupt has continued to trade after becoming aware of being insolvent.
Penalty: This is seldom used.
Fact: The bankrupt has been guilty of any fraud or fraudulent breach of trust
Penalty: The trustee can make a recommendation but it is common that the penalty is set by the court and can be the payment of monies and/or a delay in time before the discharge. (above)
Fact: The bankrupt has committed an offence in connection with the bankrupt’s property or any proceedings under the bankruptcy
Fact: The bankrupt has not performed his or her duties under the act or did not comply with an order of the court.
Fact: The bankrupt has, in the 3 months prior to the bankruptcy, incurred debt in order to bring his or her assets equal to 50 percent of the liabilities
Fact: The bankrupt, in the 3 years prior to the bankruptcy, did not keep books and records of a business he or she engaged in
Penalty: Above penalty
Fact: The bankrupt has failed to satisfactorily account for any loss of assets
Fact: The bankrupt has brought on or contributed to his or her bankruptcy by rash and hazardous speculation, unjustified extravagance in living, gambling, or culpable neglect of the bankrupt’s business
Fact: The bankrupt has put any of his or her creditors to unnecessary expense by a frivolous or vexatious defence to any action properly brought against the bankrupt
Fact: The bankrupt has, within 3 months prior to bankruptcy, made a payment to any of his or her creditors in preference to the other creditors