What is Bankruptcy Discharge?

Bankruptcy Discharge is the final and most crucial stage in the process of bankruptcy. On the day that you file for bankruptcy, there is an automatic “stay” that will prevent creditors from collecting money directly from you. However, these creditors will still exist. Your debts will not be erased until after you receive your discharge. Bankruptcy Discharge is very important since it is required to eliminate your debts.
This article talks about the following:
  1. First, Second and Third Bankruptcy

  2. Canadian Bankruptcy Law’s Provisions on Bankruptcy Discharge

  3. Steps that debtors should Undertake

What is the First, Second and Third Bankruptcy?

You are eligible to be granted an automatic discharge if this is your first or second bankruptcy. However, you will be required to go to court for third bankruptcy cases. There are two major reasons that will prevent you from receiving an automatic discharge.
The reason is that you have failed to fulfil your mandatory obligations. These are providing the trustee with proof of your income each month; failure to attend your counselling sessions; inability to provide your tax information; and, incapacity to make the required payments. You will be required to go to court and explain to the Registrar or bankruptcy judge the reasons for not being able to complete your duties.

What are the Canadian Bankruptcy Law’s Provisions on Bankruptcy Discharge?

The Canadian Bankruptcy Law provides that a discharge can be contested only if the debtor has not met financial obligations set out for them under their original bankruptcy agreement. In most bankruptcy cases, a bankrupt person is required to work with a court appointed trustee to liquidate eligible assets, work out a monthly budget and make monthly payments to the trustee. This trustee will take care of giving the money to creditors. If the creditor believes that the bankrupt person did not comply with the terms of their agreement such as making payments, he or she has reason to oppose the discharge.

The creditor can send a letter to the Office of the Superintendent of Bankruptcy, trustee of the bankruptcy and the bankrupt person themselves stating his or her desire to oppose the discharge and the grounds for contesting it. The parties involved can wait for the notice of a court date and venue from the bankruptcy trustee. The creditor can bring any proof to support the claim that the bankrupt person violated the terms of the bankruptcy. It is up to the court to decide the merits of the case based on evidence.

What are the Steps that the Debtor must undertake?

In Canada, a bankruptcy can be filed only through a Trustee in Bankruptcy. The trustee is an individual licensed by the Office of the Superintendent of Bankruptcy to administer the bankruptcy process. The first step in bankruptcy procedures is to find a Trustee in Bankruptcy in your area by consulting the Yellow Pages or browsing through the Internet. Set up an appointment to discuss your financial situation. During this free meeting, the trustee will review your financial situation and discuss the options available to you. There are alternatives to bankruptcy, such as filing a proposal that you may want to try first.

Bankruptcy Issue

How long you stay in bankruptcy is determined by the Bankruptcy Insolvency Act. It is not determined by which trustee you choose to file your bankruptcy with. Being discharged from bankruptcy requires obligations from the debtor including mandatory counseling sessions performed by the trustee or designate. You will not be discharged from bankruptcy if the required payments are not fulfilled.

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