The final and most important step in the bankruptcy process is your discharge from bankruptcy. The discharge from bankruptcy is the legal mechanism that relieves you of your obligations to repay the debts that existed at the date of bankruptcy. If you don’t receive your discharge, the debt doesn’t go away. At Boale, Wood & Company Ltd., we cannot stress enough the importance of getting your discharge.
One of the common misconceptions made by people declaring bankruptcy is that they are under the impression that the filing for bankruptcy gets rid of the debt. Not so. On the day you file for bankruptcy, you are protected from collection action by your creditors. There is an automatic “stay” which prevents your creditors from continuing or starting collection action against you. However, your creditors still exist; they just can’t do anything to you. Your debts don’t go away until you receive your discharge. That’s why your discharge is so important, because it’s necessary to eliminate your debts.
How Long Will I Be Bankrupt?
The length of your bankruptcy is determined by four main factors. These factors may change under certain circumstances which affects the length of the bankruptcy.
- If this is your first bankruptcy
If this is your first bankruptcy, then you will be eligible for an automatic discharge after 9 months subject to the surplus income threshold.
- If you have been bankrupt before
If you have been bankrupt before you will not be eligible for a discharge in 9 months. Your bankruptcy will be a minimum of 24 months subject to the surplus income threshold.
- If you have surplus income.
If you have surplus income that exceeds the minimum amount set by the government, your bankruptcy can be extended for a longer period of time. If you are a first time bankrupt and your surplus income is over the income threshold, you would be eligible for an automatic discharge after 21 months (as opposed to 9 months). If you are a second time bankrupt, you would be eligible for an automatic discharge after 36 months. The extension of time o ones bankruptcy is set out in the legislation. It’s not at the discretion of the Licensed Insolvency Trustee (“LIT”).
- If you are not eligible for an automatic discharge.
Your discharge from bankruptcy will happen automatically if
- the discharge is not opposed by your LIT, a creditor or the Office of the Superintendent of Bankruptcy (“OSB”);
- you have attended the mandatory financial counseling sessions;
- this is your first or second bankruptcy; and
- you have made all required payments.
There are, however, a few reasons why you would not receive an automatic discharge. It is due to an opposition to your discharge. The most common reasons for opposition are:
- You did not complete your duties. This is the most common reason why people do not receive an automatic discharge. In other words, you did not do everything you were supposed to do such as provide the LIT with proof of your income each month;
- You did not attend your counseling sessions – these sessions are mandatory to obtain your automatic discharge;
- You did not provide your tax information – the LIT is obligated to file your tax returns in certain instances; and
- You did not make the required payments.
If you did not perform your duties, you are not eligible for an automatic discharge. In order to get discharged, a Court application is required.
ALERT: Complete your duties! If you are having problems meeting your obligations to the LIT, speak to them immediately. It’s not hard. It is a process and you must complete the process. We are here to help you every step of the way but we can’t do it for you and once you start it is in your own best interest to complete the process.
You will also not receive an automatic discharge if one of your creditors (the people you owe money to) opposes your discharge. This is a rare occurrence, but it could happen. If they object, a Court hearing is held, and the judge will decide whether or not you will be discharged and what type of discharge would be appropriate in the circumstances.
For a third time or more bankrupt, a Court application is required to obtain a discharge.
Again, be sure to complete all your duties so that you receive your discharge from bankruptcy, and officially eliminate your debts.
The length of the bankruptcy is summarized in the following table:
|No Surplus Income
|First Time Bankrupt
|Second Time Bankrupt
|Third Time Bankrupt or more
|Automatic Court Application
Benefits of being discharged
As previously stated, the discharge from bankruptcy is the final and most important step. There are a number of benefits from being discharged.
- You are no longer bankrupt. You have no further obligations under the Bankruptcy and Insolvency Act;
- You can become a Director of a Corporation or be the Power of Attorney for someone;
- The clock starts ticking on the time period of when the credit bureau clears your record of having gone bankrupt;
- You will receive relief from all your debts except for the most serious debts such as:
- Court imposed fines;
- Child support, alimony and other maintenance payments owed;
- Student loans in certain situations
- And some others.
What are the consequences of not getting discharged?
There are times where an individual doesn’t receive their discharge from bankruptcy. They may not have completed their duties, or their discharge was opposed by a creditor or the OSB. Maybe they had personal issues to the extent that they just couldn’t carry out their responsibilities.
So now what? Contact your LIT and find out why you did not get discharged and what you have to do to get your discharge. The LIT may want a fee for reopening your file. If you had a bad relationship with your LIT 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.
What if you do nothing?
If a person does not get a discharge from bankruptcy, the LIT will close their file. This has important consequences for you. Once the LIT is discharged, the protection from your creditors, which you so desperately needed at the outset of the bankruptcy, is gone and the creditors’ rights are revived. That means that they can pursue you for the original debt, plus interest, as if you had never been bankrupt.
You are still an undischarged bankrupt and subject to the requirements of the Bankruptcy and Insolvency Act including the duties and the offences under the legislation.
Lastly, information pertaining to bankruptcy remains on an individual’s credit file for specified time periods following the discharge. So if you don’t get discharged, the time to get the information off your credit report has not started.
This is the worst possible result.
Here is how to get your bankruptcy discharge if it has been a few years since you went into bankruptcy:
So now it has been a while since you talked to your LIT and the creditors are after you. Now you are ready to proceed and get your discharge. How do you go about it?
- Contact your LIT – it is important for you to talk to your LIT. They would be in the best position to assist you in getting your discharge. If your LIT doesn’t want to assist you (once they have been to Court they are not required to assist you further) you need to find someone who will. Call another LIT to see if they would assist you.
- Have available the LIT’s Report (170 Report) – this is the report where the LIT reviewed how you conducted yourself prior to and during your bankruptcy. This report outlines the conditions that have to be met in order for you to receive your discharge.If you do not have this report you can get a copy at the Bankruptcy Court, in the area you filed your bankruptcy. You may also get a copy of the report from the LIT if the LIT is willing to go through his records to find the report. The LIT, if he is willing to get the report, will likely charge you for this service. If you are not sure who your LIT was contact the Office of the Superintendent of Bankruptcy.In British Columbia, the Court Order will usually specify what is required to be done. You can get a copy of this Order from the Bankruptcy Court.
- Have available what is required to meet the conditions outlined in the LITs report or the Court Order – If you had to pay a certain amount of money make sure you have it available or are ready to start making the monthly payments. If you had to meet other conditions such as providing proof of income, tax information and so forth, make sure that is available.
- Make arrangements to attend at Court – Ask your LIT to do this. There will likely be an additional charge for this. The LIT may refuse to do this. Then you will need to retain a lawyer to represent you or represent yourself at Court. However, this is usually beyond the ability of most individuals who don’t know the rules or how to present the facts to the Court. The BC Supreme Court has published a guide on how to do it yourself. This publication can be found here.
- Consider filing a consumer proposal with another LIT – if you do this and it’s accepted by the Creditors, you don’t need to be discharged from bankruptcy. The legal effect of an accepted proposal is to annul the bankruptcy. Although the insolvency legislation provides for this, they are hard to do and usually don’t work.
If you are an undischarged bankrupt and need a discharge, we may be able to assist you.
Call us. It’s not too late. (604) 605-3335