Conditional Discharge in Bankruptcy: What is a Conditional Discharge?

Ever heard of a person being denied being released from his/her bankruptcy status by Court Order?

They are probably being held under “Conditional Discharge in Bankruptcy”.

Want to know what this term means and what its implication are?

Read on below.

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What is a Conditional Discharge in Bankruptcy?

Discharge is the final step in the process of ridding a person from their bankrupt status.

When the bankruptcy case progresses to this step, the bankrupt individual is no longer liable to pay for their debts.

In an absolute discharge, except for certain things, the bankrupt individual can walk scot free without having to pay for any of his/her debts.

However, the Court reserves a provision for conditional discharge.

As per conditional discharge, certain conditions can be specified by the legal authorities which the bankrupt individual has to meet, before their impending discharge can be deemed absolute.

Generally, under conditional discharge in bankruptcy, the bankrupt individual is ordered by the Court to pay a sum of money back to their creditor over a period of time.

When Does a Conditional Discharge in Bankruptcy Occur?

A conditional discharge in bankruptcy is uncommon, but not unheard of.

Usually, a bankrupt individual may find themselves placed under conditional discharge in bankruptcy if their absolute discharge meets contestation by other agencies.

Agencies such as the Licensed Insolvency Trustee (LIT) or the Office of the Superintendent of Bankruptcy can oppose the absolute discharge of a bankrupt person.

Reasons why their absolute discharge might have been opposed could range from their failure in:

  • Attending creditor meeting, as requested or refusing examination by OSB;
  • Reporting their income and expenses to the LIT accurately and not making required payments;
  • Submitting all their credit cards to the LIT for cancellation;
  • Disclosing information about all properties held or not submitting this property to the LIT;
  • Offering up all tax return and insurance policy details and being unable to provide RRSP statements to the LIT;
  • Attending the mandatory number of financial counseling sessions;
  • Informing the LIT of their residential address and any moves during the bankruptcy procedure.


Conditional Discharge in Bankruptcy is Absolute Discharge in Bankruptcy with Conditions

Yes, there is very little in principal that differentiates an absolute discharge in bankruptcy from a conditional discharge.

The only difference being, an absolute discharge occurs immediately.

When a person is handed an absolute discharge of bankruptcy, they can walk away without having to pay any damages to their creditors due to having gone bankrupt.

You can do the same if you’ve been held under conditional discharge in bankruptcy.

However, you can expect it to take more time.

You will have to pay heed to all the conditions laid out for your discharge and systematically meet each of them before you can secure your release from bankruptcy.

Usually, a maximum period of 9-12 months delays a conditional discharge in bankruptcy from an absolute discharge of bankruptcy.

The end result is the same for both.

You Should Worry if You Fail to Receive Discharge at All

A conditional discharge in bankruptcy shouldn’t trouble you, after all, you are bound to secure your release from bankruptcy sooner or later.

What is a troubling prospect is, if you fail to negotiate your release.

The Courts can refuse discharge in some cases.

If you manage to find your pardon for discharge cancelled, you will unfortunately still have to carry around your bankrupt status.

In addition, you will continue to be legally obligated to re-pay the money you owed to your creditors.

Furthermore, now, as a bankrupt individual, you will no longer be able to apply for debt exceeding the sum of $1000.

Every time you apply for a $1000 debt or less, you will need to priorly inform your potential creditor of your bankrupt status.

How to Make Things Easier for You if You Do Not Secure Discharge in Bankruptcy

If you fail to receive discharge in bankruptcy, you can continue to work with the involved financial agencies such as the LIT to find out why you were denied discharge and how you can meet their requirements for a discharge in the future.

When the time comes, you can reapply for your discharge from bankruptcy.

Another way to minimize your woes when you find your appeal for discharge in bankruptcy cancelled by the Court, is to make an official Consumer Proposal.


A delay in the discharge of your bankruptcy status, such as being granted conditional discharge in bankruptcy may dishearten you temporarily, but you should not let it dampen your spirits.

Yes, you might have to wait a while before you can get free of your bankrupt status, but at least you will be able to secure a financial fresh slate once you’ve met the conditions laid out.

Do not take these conditions lightly though, you could end up with a refused discharge if you are unable to meet them as per the specifications decided by the Court.


Source –

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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