bankruptcy discharge

What Does Bankruptcy Discharge Mean? How Do I Get Discharged From My Bankruptcy?

If you’ve filed for Personal Bankruptcy and your Bankruptcy is ongoing (known as an undischarged Bankruptcy), it’s likely that you’re waiting for the day you receive your Bankruptcy discharge, so you can start to rebuild your life. 

Filing for Bankruptcy through a Licensed Insolvency Trustee (LIT) is the first step in clearing your debts, but the process is not complete until you have received your Bankruptcy discharge. Once you’ve fulfilled all of your duties in your bankruptcy and you are free from your debt obligations, you will receive your Bankruptcy discharge from your LIT. 

What is a Bankruptcy discharge?

A Bankruptcy discharge is effectively the final step of the Bankruptcy process in Canada. Once you’ve fulfilled all of your Bankruptcy obligations, your LIT will issue you a certificate of discharge. With this, you will be released from all obligations to repay the debts included in your Bankruptcy filing and it marks the end of your bankruptcy.  

You may think that you’re discharged from your debts as soon as you declare Bankruptcy, however, this isn’t necessarily the case. While you stop making debt payments as soon as you file, you remain legally liable for the debts until the end of the Bankruptcy process. Once you receive the Bankruptcy discharge, you will then be released from your debt obligations.

When is a Bankruptcy discharged?

When your Bankruptcy is discharged will depend on your individual circumstances and whether you have declared Bankruptcy in the past, or if this is your first Bankruptcy.

If this is your first time filing for Bankruptcy, then it should last approximately nine months, as long as you fulfill all the duties assigned to you by your LIT.
If this is the second time you are filing for Bankruptcy, it’s likely that you will be bankrupt for 24 to 36 months, depending on your individual circumstances.

Once you’ve received an absolute discharge from your Bankruptcy, you will no longer be responsible for any of the discharged debts. But it’s important to note that your Bankruptcy will appear on your credit rating for six to seven years.

A Bankruptcy is automatically discharged nine months after the Bankruptcy is filed if:

  • This is your first Bankruptcy
  • You have attended two financial counselling sessions;
  • You aren’t required to pay a portion of your income into the Bankruptcy estate as per the standards established by the Office of the Superintendent of Bankruptcy (OSB);
  • The discharge is not opposed by a creditor, the Licensed Insolvency Trustee (LIT) or the OSB

If you are required to pay a portion of your income into the Bankruptcy estate (property you own), and this is your first Bankruptcy, you will be eligible for an automatic discharge after contributing to the estate for 21 months.

When is a discharge challenged?

When going through the Bankruptcy process, your discharge may be opposed by creditors, your LIT or the Bankruptcy and Insolvency Act (BIA) if you haven’t met your obligations, or you have committed an act of misconduct under the BIA. If your discharge has been challenged, the Court will review the opposition and come to a decision.

In terms of Bankruptcy discharge, there are four types of discharge:

  1. Absolute discharge: You are released from the legal obligation to repay the debts that existed on the day the Bankruptcy was filed, except for certain types of debt that will be explained to you by your LIT. 
  2. Conditional discharge: You must meet certain conditions to obtain an absolute discharge. It’s likely you will be required to pay a certain amount of money over a specific period. However, the Court may also impose other conditions. Once you have met all the conditions, an absolute discharge will be granted.
  3. Suspended discharge: An absolute discharge that will take effect at a later date.
  4. Refused discharge: The Court has the right to refuse a Bankruptcy discharge.

What is required to be discharged from Bankruptcy?

To be discharged from your Bankruptcy, you will need to fulfill all of your Bankruptcy duties which will be explained to you by your LIT. These duties include:

  • Making all your required payments
  • Handing over all assigned property to your LIT
  • Attending two mandatory credit counselling sessions
  • Attending any meeting of creditors or court hearing if required

If you fail to complete the above duties, this will hold up your discharge and you will be waiting longer to be discharged from your Bankruptcy. 

When can I start to build credit again after Bankruptcy?

Once you are discharged from your Bankruptcy, you will be able to start building your credit score again, but rebuilding credit won’t happen overnight. After your discharge, it may be a good idea to review your credit report and address any errors. If you notice any errors, it’s important to contact the credit agency for this to be amended. 

If you’re looking for support to get your finances back on track, LITs are also trained credit counsellors who can support you through the process, from developing a budget to helping you change your financial habits for the long term.

Rebuilding your credit score after Bankruptcy will take time, but it isn’t impossible. Even paying your household bills on time can help your credit rating to improve over time. The aim is to demonstrate to creditors that you can manage credit responsibly.

Ready to take control of your debts?

It’s never too late to seek help with your debts. With the help of a supportive Licensed Insolvency Trustee, you can put a plan together to manage your debt and relieve your financial stress. . Contact us today for a free consultation – you deserve a fresh start.

About Author

Allan Marshall & Associates Inc.

Allan Marshall & Associates Inc. is a Licensed Insolvency Trustee firm found in Alberta & the Maritimes. We are licensed by the Federal Government of Canada to administer bankruptcies, Consumer Proposals, receiverships and other insolvency services. We have the knowledge and experience to assess your situation and offer the best advice for your particular need, whether you are a first time bankrupt or simply struggling to make ends meet.