Once an individual files an assignment in bankruptcy, they must receive their discharge in order to be relieved of the obligation to pay their creditors. In usual circumstances, between the bankruptcy filing and the discharge, a bankrupt may want to annul (cancel) the bankruptcy. The desire to annul a bankruptcy may arise if the bankrupt becomes entitled to an inheritance or a settlement in a lawsuit that would pay their debt in full; they don’t want to complete their duties imposed by the Bankruptcy and Insolvency Act and have regret about filing bankruptcy for maybe a small amount, or their personal situation has changed impacting their decision to have filed a bankruptcy. As per below, these reasons will not likely convince a court to annul a bankruptcy.
There are basically two ways to annul a personal bankruptcy filing. The first one is to file a proposal to the creditors which, if accepted, would annul the bankruptcy. The second method is to make an application to the court. If the court believes that an assignment ought not to have been filed as the debtor was not insolvent, abused the process of the court or committed a fraud to their creditors, an order can be made to annul the bankruptcy. The fact that the debtor has paid all of their debts in full is not sufficient reason to annul a bankruptcy. The court considers the circumstances as they existed when the assignment in bankruptcy was filed and the interests of many stakeholders, including the bankrupt, the creditors and the public interest in the insolvency process. It is at the discretion of the court to annul a bankruptcy.
Filing an assignment in bankruptcy provides relief from debt and allows a debtor to move forward with a financial fresh start. All debt relief solutions should be explored with a Licensed Insolvency Trustee to ensure you can make an informed decision that you will not later regret.
Have questions about filing a bankruptcy? Talk to a Taylor Leibow Fresh Start Now Licensed Insolvency Trustee at 1-888-287-2525.
By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)
I am currently in bankruptcy protection (2nd time). I am unable to pay the surplus payments; which are accumulating at an alarming rate. I am unable to pay the surplus, even at the end of the 3 year period. What are my options at that stage of the bankruptcy? Annulment
/proposal to creditors? Or place myself at the mercy of the court, and hope for discharge?
Hello Derek
I recommend that you speak to your trustee about your options. You can request mediation to try and reduce the monthly surplus income payment, you can request a reduction of the total surplus payments at your discharge hearing, or agree to a conditional order for the outstanding amount in that you are not discharged until the amount is paid in full. You can then make payment arrangements with your trustee. You are likely not eligible to annul the bankruptcy if you were insolvent at the time you filed, but that is a legal question you would have to consult with a lawyer.
You could file a proposal to your creditors, which if accepted would annul your bankruptcy, but you will have to offer more than the creditors would realize in your bankruptcy for them to consider accepting it. The proposal can be over a 5 year time period and thus the monthly amount would be lower and maybe more affordable. Since your trustee is most familiar with your situation, I recommend you arrange a meeting to fully discuss the above.
Regards
Kathy
I started a bankruptcy almost ten years ago. I couldn’t attend the last credit counseling session due to undiagnosed mental health issues which have rendered me disabled. Can you tell me what options are available?
Hello Nicholas
My apologies for the delay in replying. Reach out to your trustee and they should be able to assist you.
Regards
Kathy