One of the more popular searches reaching our website is for the term “undischarged bankrupt” so I thought I would explain what it means to remain undischarged.
The Bankruptcy and Insolvency Act provides a debtor with protection from collection proceedings from unsecured creditors upon filing an assignment in bankruptcy. This “stay of proceedings” stops garnishments of income (other than spousal or child support) and collection calls until your trustee is discharged. The signing of statutory bankruptcy documents with a Licensed Insolvency Trustee does not eliminate your obligation to pay your debt though – a discharge does. Once the bankruptcy documents are filed, you become an undischarged bankrupt until you receive your discharge automatically or by the court.
A bankrupt who fails to comply with all the duties imposed by legislation or who fails to complete any conditions imposed by court, will remain an undischarged bankrupt. There are a couple major implications to remaining undischarged:
- your trustee can pursue any assets you may acquire while undischarged and could seize an inheritance or lottery winning
- After advising you of the implications, your trustee will proceed to obtain their discharge which will then lift the above stay of proceedings and revive your creditor’s rights to pursue you for payment of their debt plus interest
- A future real estate purchase could be jeopardized by remaining undischarged
- you cannot file a subsequent bankruptcy if you are not discharged
I recommend that if you are taking the difficult step of filing an assignment in bankruptcy, complete your statutory duties, obtain your discharge and start rebuilding for the future. If you are an undischarged bankrupt, contact your trustee to see what needs to be completed in order to obtain your discharge. You may have to retain legal counsel to re-apply for a discharge hearing, but your trustee can provide you with some advice. Dealing with your discharge now will enable you to permanently deal with your debt and start fresh.
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)
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