Posted: September 16, 2021
By Kyle Kawanami, Partner and Kirsty Vogelesang, Associate
The main purpose of the bankruptcy system is to assist persons experiencing financial difficulty by eliminating their debts and allowing a fresh start, free from the crippling burden of debt.
When you declare bankruptcy, the Trustee in Bankruptcy (“Trustee”) facilitates the settlement of your debts by using your available assets to satisfy the claims of your creditors. Once the bankruptcy process is complete and you have satisfied all requirements, you will be discharged from bankruptcy, meaning most (and sometimes all) the debts that were listed in your bankruptcy filing are forgiven. However, sometimes your discharge from bankruptcy doesn’t go seamlessly.
What is an automatic discharge from bankruptcy?
Under normal circumstances, you can be discharged from bankruptcy as early as nine months after you file, such as if this is your first bankruptcy, your discharge is not opposed, your debt obligations meet the criteria for Automatic Discharge and where you don’t have surplus income. The discharge period can also extend well beyond nine months; your bankruptcy may be extended if you have been bankrupt more than once, have surplus income, or if your Trustee or a creditor, such as the Canada Revenue Agency, objects to your discharge and demands that you take further steps to satisfy your creditors before being discharged.
What kind of objections can delay my bankruptcy discharge?
Your discharge from bankruptcy may be objected and therefore delayed because you have not done something that had to be done or failed to meet the conditions required of you during the bankruptcy process. It may also be that your Trustee is seeking a condition on your discharge, such that you are discharged but with some remaining obligations. For example, while bankruptcy is normally meant to wipe away your debts, your Trustee may nevertheless request that as a condition of being discharged, you continue to make additional payments to your bankruptcy estate for the benefit of your creditors. This type of discharge is referred to as a “Conditional Discharge.”
Another reason for a potential objection may result from a disagreement over the status of or calculations associated with property exemptions from bankruptcy. For example, there are exemptions which may allow you to keep your home from being included in the pool of assets that your Trustee uses to pay amounts owed to your creditors. A dispute can arise if the Trustee calculates the exemption on your home such that you may pay more to retain your home post-bankruptcy.
There may also be a dispute with your Trustee over completion of your duties required by the Bankruptcy and Insolvency Act. Once you are bankrupt, you are required to perform certain duties outlined in the Bankruptcy and Insolvency Act such as completing credit counselling sessions, providing income and expense reports, and paying surplus income as instructed by the Trustee. In the event you fail to complete your duties within the given time period, your Trustee may oppose your discharge. If your Trustee is objecting to your discharge on the basis of failure to complete your duties, the resolution may be as simple as complying with your Trustee’s requests.
These disputes would have to be resolved before you can get your discharge.
What happens if I am an undischarged bankrupt?
If you do not receive your discharge from bankruptcy, your Trustee may eventually close your file and withdraw. In that case, the protection from creditors that you would normally get while being bankrupt will be lost and your creditors can continue to come after you. You may also have to pay your Trustee a fee to re-open your file.
If your Trustee seeks a conditional discharge, or if a creditor opposes your discharge entirely, you will have to go to Bankruptcy Court. The Bankruptcy Court may agree with your Trustee or creditor and grant a court order against you, or it may decide you have nothing further to do and grant your discharge. You are allowed to have your own lawyer to assist you at this Court hearing to object to the conditions requested by the Trustee or creditor and to seek your discharge.
How can Emery Jamieson LLP assist you?
Emery Jamieson LLP has extensive experience in Bankruptcy Court assisting clients in obtaining their discharge where the Trustee or a creditor is opposing.
If you are struggling with how to deal with an opposition to your discharge or are unsure how to fulfill the terms of your bankruptcy, contact our bankruptcy team. We’ll help you understand and complete your legal duties and mediate disputes with creditors or your Trustee.