To be discharged from bankruptcy in Canada, you must fulfil your obligations by making your payments and performing some bankruptcy duties, as per the Bankruptcy and Insolvency Act.
In conjunction with your Licensed Insolvency Trustee, you must complete these tasks to ensure you are discharged from bankruptcy and released from your debts.
This guide will explain how a bankruptcy discharge works in Canada and what bankruptcy duties you must perform to complete the process.
Here’s everything that we’ll cover in this article:
What are bankruptcy duties?
Bankruptcy duties are tasks that you must complete for discharge from bankruptcy.
Some typical bankruptcy duties include the following:
- Disclose all of your debts and assets.
- Surrender any non-exempt assets to your trustee before and during bankruptcy.
- Tell your trustee if you’ve disposed of any assets in the past year.
- Give all credit cards to your trustee for cancellation.
- Supply income tax return information, insurance policies and any other documents requested by your trustee.
- Co-operate with your trustee during your bankruptcy.
- Supply proof of income and expenses.
- Make your payments on time.
- Inform your trustee if your financial situation changes.
- Attend any creditor meetings or examinations under oath when necessary.
- Execute any powers of attorney, transfers, deeds and instruments or acts that may be required.
- Tell lenders that you are bankrupt when applying for credit over £1000.
- Keep the trustee informed if your residential address changes.
- Attend two mandatory financial counselling sessions.
- Refrain from becoming a director of a company while bankrupt.
Bankruptcies typically only involve some of the above tasks. By doing what’s asked, you’ll receive protection against all creditor action.
Of course, your trustee will explain all these duties to you, but let’s look at some of them in more detail, so you know what to expect.
Surrender your non-exempt assets
As part of your bankruptcy, your Licensed Insolvency Trustee will seize any non-exempt assets, including those acquired during your bankruptcy.
Each province and territory has bankruptcy exemptions that allow you to keep certain assets. Typically, assets such as clothing, household furnishings, a vehicle, home equity and some savings are exempt from seizure.
Have you disposed of any assets in the past year?
If you’ve sold, given away or cashed in any assets in the past year, you must tell your trustee.
Supply income tax return information
Before your bankruptcy, your trustee will file any outstanding tax returns up to the date of your bankruptcy and after your bankruptcy. To do this, your trustee requires your income tax information.
Best of all, your bankruptcy includes any outstanding taxes owed to the Canada Revenue Agency (CRA).
Attend any creditor meetings or examinations
Being asked to attend a creditor meeting is unlikely, but you will have to go and answer questions truthfully if requested.
Most bankruptcies are automatically discharged once completed, but you might have to go to court if you are not eligible.
Submit proof of income and expenses
During your bankruptcy, you must send proof of your income and expenses to your trustee every month. This allows your trustee to calculate if you have surplus income.
Make your payments
You will have to pay to file for bankruptcy, and your Licensed Insolvency Trustee will explain the cost to you during your consultation.
Attend two mandatory financial counselling sessions.
Lastly, you must attend two mandatory financial counselling sessions as part of the bankruptcy process.
Completing the program should give you a greater awareness of monthly budgeting and sound financial management.
You must complete these sessions during your bankruptcy.
What is a bankruptcy discharge?
A bankruptcy discharge means that you’ve completed your bankruptcy. When you’re discharged, you are released from the legal obligation to repay debts that existed when you filed your bankruptcy.
In simple terms, you’ve cleared your debts, and you will no longer owe any money to your creditors.
Does bankruptcy discharge all debts?
Some debts are not discharged and will still have to be paid:
- 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 surplus income affects your bankruptcy discharge
Surplus income affects the time it takes to be discharged from bankruptcy.
If you do not make all of your surplus income payments, you won’t be automatically discharged from your bankruptcy, and you will probably need to go to court.
See also: How surplus income in bankruptcy works
When will I be discharged from bankruptcy?
Usually, a first-time bankrupt will be eligible for discharge after nine months.
However, your bankruptcy period can be extended if you have been bankrupt before or have surplus income.
Length of a first-time bankruptcy
If this is your first bankruptcy and you have no surplus income, you will be eligible for discharge after 9 months.
If this is your first bankruptcy and you have surplus income, you will be eligible for discharge after 21 months.
Length of a second-time bankruptcy
If this is your second bankruptcy and you have no surplus income, you will be eligible for discharge after 24 months.
If this is your second bankruptcy and you have surplus income, you will be eligible for discharge after 36 months.
Length of a third-time bankruptcy
A third bankruptcy requires a discharge hearing in bankruptcy court. The court will decide if you should be discharged.
See also: How long do bankruptcies last?
Automatic discharge in bankruptcy
You will be automatically discharged in nine months if you 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.
- You have completed your financial counselling sessions.
This is called an absolute discharge, which we’ll cover in the next section.
Types of bankruptcy discharge
The good news is if you receive an absolute discharge from bankruptcy, you will not be required to attend court.
Your discharge can be opposed by your creditors, your Licensed Insolvency Trustee or the OSB. If this happens, the court will review your case and make one of the following decisions:
Absolute discharge: you are released from your debts included in the bankruptcy.
Conditional discharge: an absolute 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 also impose other conditions.
Suspended discharge: your absolute discharge will be granted at a future date.
Refused discharge: the court has refused your discharge.
Source: The OSB: Bankruptcy Discharge
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.
It will be harder to obtain credit during this time, so you will need to rebuild your credit.
What happens if I’m not discharged from bankruptcy?
If you’re not discharged from bankruptcy, it will remain on your credit report indefinitely, affecting your credit.
On top of this, you may not borrow more than $1,000 without informing the lender that you are bankrupt.
If you fail to mention this, you are committing an offence under the Bankruptcy and Insolvency Act that could lead to a fine, imprisonment or both.
Bankruptcy trustee responsibilities
The person responsible for managing your bankruptcy is called a Licensed Insolvency Trustee. There are several bankruptcy trustee duties that they must complete.
Trustees are licensed and regulated by the Office of the Superintendent of Bankruptcy (OSB). Only a trustee can administer insolvency proceedings, such as bankruptcy, that allow you to be discharged from your debt.
A Licensed Insolvency Trustee must administer proposals and bankruptcies fairly, protect you and your creditors’ rights, and investigate your financial affairs thoroughly.
All trustees must adhere to the standards of practice outlined in the Bankruptcy and Insolvency Act.
Once appointed, a trustee must perform their legally required duties and then apply for a discharge on your behalf. Their responsibilities include identifying the best solution to your debts, which may or may not be bankruptcy.
If bankruptcy is the best route, your trustee is responsible for helping you through the process.
They do this in several ways, such as preparing documents, collecting and distributing your payments, and preventing creditors from taking action against you during this time.
Complete your bankruptcy duties to be discharged from your bankruptcy. A bankruptcy discharge will release you from the debts included in your bankruptcy filing.
If you do not complete these duties, you will not be discharged, and you’ll 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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