Bankruptcy discharge is when your debts are legally extinguished. The length of bankruptcy prior to discharge from bankruptcy can vary for a number of reasons.
( On September 18, 2009, new bankruptcy legislation came into effect which provides for standardized periods of bankruptcy prior to an automatic discharge. Previously, only first time bankrupts with no surplus income had been eligible for an automatic discharge. )
Automatic discharge from bankruptcy
Most bankrupts will receive an automatic discharge of their debts within 9 to 36 months after the date of bankruptcy, as follows:
First time bankrupt with no surplus income 9 months
First time bankrupt with surplus income 21 months
Second time bankrupt with no surplus income 24 months
Second time bankrupt with surplus income
Income Tax Debtors
If you owe $200,000 or more in personal income tax debt ( including penalties and interest ) and that tax debt represents 75% or more of your total unsecured proven claims, you will not receive an automatic discharge after completion of the above time periods as applicable. Instead, you must then apply to the court for a discharge which may be subject to further conditions.
Opposition to discharge
Regardless of the type of discharge you may or may be eligible for, your discharge can also be opposed by the trustee, a creditor, or the Superintendent of Bankruptcy. If so, a court hearing will be scheduled and your discharge application will be heard by a judge or registrar of the court. Reasons for a discharge from bankruptcy to be opposed can include the following:
You have not yet paid surplus income owing from the bankruptcy.
You have not yet complied with all your duties during the bankruptcy, such as filing monthly income and expense statements or attending your counselling sessions.
You have committed a bankruptcy offence under the Bankruptcy and Insolvency Act.
If your discharge is opposed, the court can do one of the following:
Grant an absolute discharge of your debts.
Grant a conditional discharge such that certain conditions must be met in order for the discharge to occur.
Suspend the discharge for a period of time.
Refuse the discharge altogether.
The type of bankruptcy discharge order granted and length of any extension of the bankruptcy period will depend largely on the seriousness of the failure in performing your duties, etc. Many times an opposition can be withdrawn prior to the hearing because the duty has been complied with prior to the hearing date.
Multiple prior bankruptcies
If you have previously been bankrupt on more than one prior occasion, you will not be eligible for an automatic bankruptcy discharge and a court hearing will be required. For a third bankruptcy (assuming all your duties have been complied with) the court will normally either extend the length of the bankruptcy by suspending the bankruptcy discharge for a period of three or more years and/or require further statements of income and expenses and any surplus income to be submitted to the trustee. Depending on the individual circumstances, courts have also been known to refuse a discharge altogether for persons with multiple prior bankruptcies. It is best to consult with a bankruptcy trustee for further advice.
Seek advice from your bankruptcy trustee
Your bankruptcy trustee will discuss the likely length of your bankruptcy with you during your first meeting, and can help you to keep the bankruptcy period as short as possible.
Having access to your credit report is an important way of staying on top of your credit history and ensuring that your credit profile stays healthy. If you have been…
Canadian bankruptcy rates are down but it appears that it may just be the result of debtors seeking alternate routes to clearing up debt problems. A recent Globe and Mail…