The purpose of the Bankruptcy and Insolvency Act is to provide relief to an honest but unfortunate debtor by enabling the filing of an assignment in bankruptcy or a proposal to creditors. Upon the filing of a personal bankruptcy, there is a ‘stay of proceedings’ which means unsecured creditors are no longer able to pursue for collection of the amounts owed to them. Garnishment of wages (other than support), legal proceedings and collection calls cease, and the debtor is provided with some breathing room. The debtor continues to owe the debt until they are discharged from bankruptcy. Until that time, the debtor is considered an ‘undischarged bankrupt’.
The typical timeline is as follows:
- File assignment in bankruptcy and creditors are stopped from pursuing for collection.
- Comply with statutory requirements under the Bankruptcy and Insolvency Act – provide monthly Income and expense reports, submit monthly surplus income payments or fee payments, attend two credit counseling sessions, provide tax information, etc.
- A first time bankrupt, with no surplus income payment requirements who complies with all the duties and no oppositions to discharge are filed by creditors will receive an automatic discharge in 9 months. The automatic discharge is extended to 21 months if surplus income payments are required.
- A second time bankrupt with no surplus income payments will be entitled to an automatic discharge after 24 months. The automatic discharge is extended to 36 months if surplus income payments are required.
- All other bankrupt’s discharge will be issued by the court.
It is the discharge from bankruptcy which relieves the debtor’s obligation to pay the debt. The trustee is able to seize after acquired assets (lottery winnings, inheritances) received while the bankrupt is undischarged. If the bankrupt does not comply with all their duties and thus does not receive a discharge, the creditor’s rights to pursue them for collection will be revived once the Trustee obtains their discharge.
On a regular basis we have bankrupts who return to us many years after signing their bankruptcy documents as a creditor is pursuing them for payment or they are looking to buy a house and the undischarged bankruptcy is hindering them.
Ensure if you are taking the step to file a personal bankruptcy that you complete with all duties, obtain your discharge and follow up with the credit bureaus to make sure the discharge is properly reported. This will allow you to obtain a fresh start from your debts. Contact us today at Fresh Start Now 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)
If I filed for bankruptcy 17 years ago, but failed to get a discharge, can I finance a vehicle???
Or could seize it after I pay for it
Hello Thomas
If you did not receive your discharge from bankruptcy, the creditors’ rights to pursue you for payment would have been revived and you would technically still owe the debt. You should consult with a lawyer on the creditors’ rights to seize any assets after 17 years in relation to the Statute of Limitations under the Limitations Act.
Is there any way for me to be discharged from a 20 year old bankruptcy without a lawyer?
Hello Lucas
I would recommend you contact the trustee appointed in your bankruptcy to determine why you were not discharged and if the trustee will agree to be re-appointed to obtain your discharge. Alternatively, a lawyer can make the application for you. You may be able to file an in-bankruptcy consumer proposal to annul the bankruptcy but your current situation would have to be analyzed and considered.
Regards
Kathy
What happens to a bankruptcy if not discharged after 30 year’s
Hello Doreen
Regardless of the time that is passed, you remain undischarged and would have to make an application to Court to obtain your discharge. I recommend contacting your trustee or an insolvency lawyer to assist you with the process. The bankruptcy may not be showing on your credit report anymore, but will remain permanently in the Office of the Superintendent of Bankruptcy records. We have previously seen an undischarged bankruptcy impact a home purchase many years down the road.
Regards
Kathy
Can an undischarged bankrupt be a director of an incorporated company? Even if a lawyer added them to the corporation?
Hello Allen
Under the Corporations Act, an undischarged bankrupt can not be a director of a corporation. The lawyer may not have been aware of your undischarged status. I recommend you reach out to them for advice.
Regards
Kathy
is consumer proposal categorized under discharged/undischarged bankrupties
Hello Manoo
A consumer proposal should be reported on your credit report under insolvencies as a consumer proposal. The credit bureaus sometimes categorize it as a bankruptcy and I recommend you follow up with the credit bureau directly to correct.
Regards
Kathy Lenart