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A bankruptcy discharge serves as the final step of bankruptcy in Canada. Once you have signed the bankruptcy papers, you will assign yourself into this state in an automatic manner.
On the day that you file for bankruptcy, an automatic stay is initiated. The automatic stay will prevent your creditors from trying to recoup their money directly from you. The harassing calls and possible threats and intimidation will end. However, your debts will continue to exist until you actually receive your discharge. Due to the long and often arduous process, you may feel apprehensive about filing.
In this article our focus will be on the bankruptcy discharge process and what you should expect so that you will be better prepared before filing.
What is a bankruptcy discharge?
A bankruptcy discharge is a process that involves relinquishing the person involved from the debts that they owed to their creditors when they first filed for bankruptcy. A full discharge is the key benefit of filing for bankruptcy. A person who is insolvent will obtain debt relief under the Bankruptcy and Insolvency Act of Canada. You can provide the required bankruptcy payments to your trustee. You will also be held legally accountable for all debts owed until the bankruptcy process is finalized.
Once you have gone through all of the requirements, your bankruptcy trustee will go over all of the details. Once your licensed insolvency trustee has determined everything to be acceptable, they will file the certificate of discharge on your behalf. You will then be officially absolved of all debts owed.
How long will you be bankrupt?
The majority of bankruptcies are allowed for an automatic discharge after 9 months have passed. However, the duration of your bankruptcy may change according to certain circumstances.
You may be confused by some of the details, depending on your present situation. One thing to note is that you will not be eligible for an automatic discharge after 9 months in the event that you have filed for bankruptcy in the past. Those who are filing for bankruptcy for a second time will need to wait 24 months in order to obtain an automatic discharge.
Your surplus income will also be evaluated. If it is found that your surplus income exceeds the minimum amount that has been set by the Government of Canada, then your bankruptcy proceedings will be drawn out for a prolonged duration.
Another thing to note is that only those who have declared bankruptcy once or twice are eligible for an automatic discharge, although the waiting period will differ depending on various individual conditions and circumstances. While rare, it is possible for your trustee, the Superintendent of Bankruptcy, and one or more of your creditors to oppose your bankruptcy discharge.
Requirements to Obtain a Discharge
In order to be discharged, you must complete all of your bankruptcy duties beforehand. For instance, you will need to make all of your required payments without exception. All assigned property must also be handed over to your licensed insolvency trustee. Withholding of assets, whether intentionally or unintentionally, may carry penalties and other serious consequences.
You will be required to attend two credit counselling sessions. Your attendance is mandatory for these sessions, and you will be taught how to better handle your finances and debts in order to prevent another bankruptcy filing in the future. In some cases, you may be legally obligated to attend a court hearing or examination. You may also be required to attend one or several meetings that involve your creditors.
If you fail to complete any of the aforementioned duties, then your discharge may be held up for months or even years in some extreme cases. Fortunately, the majority of bankruptcies that transpire in Canada end in an automatic discharge. Few require a court hearing in order to reach a verdict.
However, some people will fail to meet all of their legal and financial obligations. Others will commit an offense under the Bankruptcy and Insolvency Act of Canada. If you do not wish to jeopardize the discharge process, then it is best to adhere to all discharge requirements in a timely and orderly fashion.
Debts that Will not be Released After a Bankruptcy Discharge
Most debts will be cleared by a bankruptcy discharge, including, but not limited to, unpaid bills, personal loans, credit card debts, payday loans, and other forms of unsecured debt.
However, there are certain financial obligations and debts that are exempt from discharge under Canadian law. For example, you will still be required to pay back any debts that were generated due to malfeasance (fraud).
As well, penalties and fines that have been imposed by the court must be paid. Spousal support payments (alimony), including for child support, must also be paid as usual, and you must pay back all of your student loans if you have been a student within the last 7 years as well.
There is Hope
Once you receive your discharge, your debts will be removed, which will give you a clean slate, and possibly a new lease on life. However, a record of your bankruptcy will be noted, and will be added to your credit report.
If you have filed for bankruptcy for the first time, then expect your bankruptcy history to be kept on your credit report for roughly seven years. If you file for a second bankruptcy, then your history will likely be kept in your credit dossier for a decade or even longer in some cases.
The final step in a bankruptcy proceeding is the bankruptcy discharge. Many people who obtain their bankruptcy discharge feel relieved afterwards, as the process can drag out for several years in some cases.
However, most people who file feel that the process is worth enduring. Once you have obtained an absolute discharge, you will no longer be legally obligated to pay back your debts. If you are thinking of filing for bankruptcy, then you may want to consider consulting with a bankruptcy debt relief expert beforehand.