The last stop in an individual’s bankruptcy is their discharge from bankruptcy. Once discharged, a debtor will (with some exceptions) be free of the debts for which he or she originally sought protection. While a corporate bankrupt will not be discharged until all the corporation’s debts are repaid in full, a personal bankrupt may be discharged following the distribution of assets, even where debts remain unpaid. In the majority of cases, discharge is automatic.
Timelines for Automatic Discharge
The following timelines apply to the automatic discharge of a personal bankrupt:
- For a first-time bankrupt, discharge is automatic after 9 months, or, if the bankrupt has surplus income to pay into the bankrupt estate, after 21 months.
- For a second-time bankrupt, discharge is automatic after 24 months, or, if the bankrupt has surplus income to pay into the bankrupt estate, after 36 months.
Where an Automatic Discharge is not available
There are several circumstances which may preclude an automatic discharge. Common circumstances include:
- The bankrupt has already been bankrupt twice before;
- The trustee, creditors, or Office of the Superintendent of Bankruptcy oppose the discharge;
- The bankrupt has failed to comply with his or her obligations during the bankruptcy; or,
- The bankrupt has income tax debt which is over $200,000 and comprises at least 75% of the bankrupt’s unsecured debt.
If discharge is not automatic, a discharge application must be made in court, and the registrar in bankruptcy can make orders or conditions on discharge requiring further payments by the bankrupt to the trustee, or even refuse the discharge altogether.
A bankrupt facing a discharge hearing should strongly consider consulting an experienced insolvency lawyer to assist them in obtaining a favourable result and relief from their debts.