Filing an assignment in bankruptcy legally stays (stops) your unsecured creditors from pursuing you for collection until your trustee is discharged. Your discharge from bankruptcy relieves you from your responsibility to pay your unsecured creditors (other than those that survive a bankruptcy like support, alimony, fraud, etc.). Surprisingly, some people take the hard step of filing a bankruptcy and then don’t complete their statutory duties and remain undischarged. If you remain undischarged and your trustee obtains their discharge, your creditors’ rights to pursue you for collection are revived.

In many cases your creditors have written off the debt and don’t bother to take any collection proceedings, but it is still important to be discharged from your bankruptcy for the following reasons:

  • You are not eligible to sponsor another individual to come to Canada while an undischarged bankrupt.
  • If you become the beneficiary of an inheritance while undischarged, your trustee has the right to be re-appointed and directly receive your entitlement from the inheritance to pay your creditors in full plus 5% per year interest plus fees.
  • If you accumulated debt since your last bankruptcy, you are unable to file another bankruptcy without first obtaining a discharge from your prior filing.
  • When applying for a mortgage in the future, the fact that you are undischarged is typically uncovered and hinders your ability to be eligible for a mortgage.
  • The bankruptcy will be reported on your credit bureau for 6-7 years from discharge. The bankruptcy filing may fall off your credit report in the interim, but when you obtain your discharge it will be reported again impacting your credit score which delays your fresh start.

While the above reasons may not seem important at the moment, they may sometime in the future. I recommend you reach out to your trustee today to find out the necessary steps to obtain your discharge.

Kathy LenartBy Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)