Being discharged from bankruptcy is the final step that releases you from the obligation to repay your debts.
This guide will explain what bankruptcy discharge means and what you need to do to be successfully discharged.
What is a bankruptcy discharge?
A bankruptcy discharge means that you’ve completed your bankruptcy. To be discharged, you must meet all the conditions of bankruptcy as defined under the Bankruptcy and Insolvency Act.
When this happens, your bankruptcy trustee will give you a certificate of discharge, and you will be released from the debts in your bankruptcy.
A bankruptcy discharge will clear most unsecured debts, such as credit cards, loans and other lines of credit. However, some debts are not discharged, such as:
- Support payments to a former spouse or children.
- Fines or penalties imposed by the court.
- Debts from fraudulent activity.
- Student loans (if less than seven years have passed since you stopped being a full-time or part-time student).
- Secured debts such as a mortgage or car loan.
- Property taxes.
- An award by a civil court for damages arising from personal or sexual assault.
How to get discharged from bankruptcy in Canada
To be discharged from bankruptcy in Canada, you must complete some duties, such as:
- Making your payments on time.
- Surrendering some assets.
- Submitting monthly proof of income and expenses if you have surplus income.
- Supplying any necessary documents.
- Attending financial counselling sessions.
If you don’t complete these duties, you won’t be automatically discharged, and you will need to go to a court hearing to be discharged.
How long does it take to get discharged from bankruptcy?
Typically, a first-time bankrupt with no surplus income will be eligible for an automatic discharge after nine months if they meet the following criteria:
- It’s your first bankruptcy.
- Your discharge is not opposed by your creditors, trustee, or the OSB.
- You are not required to pay any surplus income payments.
- You have completed your financial counselling sessions.
Your bankruptcy time period takes 21 months if you have surplus income. A second bankruptcy takes even longer — 24 months with no surplus income and 36 months without.
A third bankruptcy requires a discharge hearing in bankruptcy court. The court will decide if you should be discharged.
Bankruptcy discharge in court
Most people that file for bankruptcy receive an automatic discharge. This happens when you complete all of your bankruptcy requirements without objections.
If a creditor, your trustee or the Office of the Superintendent of Bankruptcy opposes your discharge, a court hearing will decide if you should be discharged.
The court will then decide on one of the following types of discharge:
You are released from the debts that were included in your bankruptcy filing.
A conditional discharge will be granted when you meet some conditions. Typically, you’ll be asked to pay some money over a specific period, but the court may impose other conditions.
A suspended discharge means you will be discharged at a future date. This often occurs if you have not completed your duties under the bankruptcy or engaged in unacceptable conduct. You may also receive a suspended discharge if you’ve been bankrupt before.
Although rare, the court can refuse your bankruptcy discharge, and you can remain bankrupt.
What happens after a bankruptcy discharge?
When your trustee is satisfied that you’ve fulfilled all of your obligations and none of your creditors oppose your bankruptcy discharge, you’ll be given a bankruptcy discharge certificate, and your bankruptcy is complete.
Bankruptcy negatively impacts your credit score. A first-time bankruptcy will appear on your credit report for six to seven years, and fourteen years for a second bankruptcy.
It will be harder to obtain credit during this time, so you must take steps to improve your credit.
If you complete your bankruptcy duties, you will be discharged from your bankruptcy, allowing you to clear your debts. If you fail to do so, you will not be discharged and still owe your debts to your creditors.
If you want to learn more about the bankruptcy process and what bankruptcy duties apply to you, connect with a Licensed Insolvency Trustee for a free consultation.
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