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DISCHARGE FROM BANKRUPTCY CANADA: OUR DETAILED STEP-BY-STEP GUIDE

discharge from bankruptcy canada
discharge from bankruptcy canada

What are the implications of discharge from bankruptcy Canada?

If you are experiencing financial troubles and can’t pay your debts, you can file for bankruptcy in Canada. This legal process lets you off the hook for your debts and start fresh. Once you’re discharged from bankruptcy, you’re no longer responsible for those debts (other than for a few exceptions noted below). Filing for bankruptcy is stressful. We understand how difficult and stressful the bankruptcy process can be, so we hope that this will be a helpful resource for you.

Once the Trustee has completed their duties under the Bankruptcy and Insolvency Act (Canada) with respect to the administration of your property and the bankruptcy estate, the next step in the bankruptcy process is they must apply for a discharge. This will occur after the Trustee has applied for your discharge from bankruptcy Canada, even if you did not get an absolute discharge.

This Brandon’s Blog is for people who have made a bankruptcy filing but have not yet been discharged. If your Licensed Insolvency Trustee has been discharged or is otherwise unable to help you with a second discharge application, this blog will provide you with the information you need to get through the process on your own.

Discharge from bankruptcy Canada: What are the implications if you are not discharged from bankruptcy?

If your previous application for discharge was unsuccessful, you remain an undischarged bankrupt and your Trustee is not obliged to make another application on your behalf. However, you should check with your Trustee first as they may or may not be prepared to do so.

We often receive calls from individuals who claim that their Trustee has been discharged, but they have not been. They express confusion as to why their Licensed Insolvency Trustee will not make an application for their discharge from bankruptcy. A quick search reveals that in these cases, the individual received a conditional discharge, but has not yet fulfilled all of their conditions to get a bankruptcy discharge. That is why their conditional discharge has not yet been converted into an absolute discharge.

If you filed an assignment in bankruptcy and are still an undischarged bankrupt, you may be able to apply for discharge from bankruptcy. An insolvency Trustee only needs to make one application on your behalf. Once the Trustee obtains their discharge, they do not need to make your application for discharge on your behalf again.

The Licensed Trustee cannot be discharged until all bankruptcy administration requirements have been met, including making the first discharge application on behalf of the bankrupt person.

discharge from bankruptcy canada
discharge from bankruptcy canada

Discharge from bankruptcy Canada: How do you obtain a bankruptcy discharge in Canada?

Automatic discharge from bankruptcy is typically granted unless there are exceptional circumstances. If there is opposition to the automatic discharge, the discharge application must be brought before the court for a hearing.

If you did not complete all of your bankruptcy duties as the bankrupt person, such as providing income and expense statements, attending required financial counselling sessions, and/or paying surplus income, your Trustee had reasons to oppose your automatic discharge and scheduled a hearing with the court.

The Report of Trustee on Bankrupt’s Application for Discharge sets out the reasons for the insolvency Trustee’s opposition to a bankrupt’s application for discharge. This document is on file with the court.

If a bankrupt does not receive a discharge at the time of the court application, it is usually because they have not yet done what is required. The associate justice/registrar who heard the application at court may have therefore adjourned the application (i.e. stated it was to be heard at a later date, which may or may not have been set).

The court may have adjourned your discharge application or imposed conditions that must be met before you are entitled to a discharge. The disposition sheet from the hearing will state what the court decided in this regard.

Discharge from bankruptcy Canada: What are the steps to clear my bankruptcy?

It’s not unusual for people who didn’t do what they were supposed to at first to try and get back on track and do what’s required to get their discharge. You must comply with your duties during bankruptcy to the best of your ability and be prepared to explain to the court any deficiency in doing so.

For example, to get your discharge, you must be able to provide details and evidence of your income and expenses during bankruptcy. You probably recall that you were required to provide the Trustee with your monthly income and expense reports. If you’re unable to provide the court with those details, the court may want to review your income tax returns for that period. If you want the court to rescind or vary the conditions imposed, you must show that you complied with the conditions to the best of your ability.

There are many examples of trying your best to meet the conditions but maybe not perfectly. If the court orders you to pay a certain sum of money to the Trustee by a certain date, you can make the court-ordered additional payment but not by the specified date. If you were required to make surplus income monthly payments but didn’t make them all, that’s one reason there were conditions attached to your discharge. You can apply to the court to change the date and get your discharge.

Another one is that you didn’t finish all your required credit counselling sessions. You could finish them and then provide proof of completion to the court.

discharge from bankruptcy canada
discharge from bankruptcy canada

Completing your own application for discharge from bankruptcy Canada

Making your own application to be discharged from bankruptcy can be a bit daunting, but don’t worry—just follow a few simple steps and you’ll be all set. Here are some tips to help you get your application ready and submitted without the help of a bankruptcy trustee or a bankruptcy lawyer.

To begin, you’ll want to locate your bankruptcy file at the court office. Once you have your file, be sure to look through it thoroughly to find:

  • your bankruptcy court file number;
  • the Report of Trustee on the Bankrupt’s Application for Discharge under section 170 of the BIA;
  • any order issued by the bankruptcy court at the original discharge hearing; and
  • the court’s disposition sheet from any previous discharge hearing identifies what the court previously ordered or decided.

You will need copies of these documents. You can ask the court office to make copies for you. They will charge you a fee for photocopying. You should check the Report of the Trustee, the court’s disposition sheet, and any court order to see what you failed to do and what conditions the court has imposed. Also, it is not a bad idea to find out who attended your last application for discharge.

You should check the Report of the Trustee, the court’s disposition sheet, and any court order(s) in the file to see what you didn’t do and what conditions (if any) the court has imposed. Lastly, you need to schedule a date for your discharge hearing with the bankruptcy court.

You will be required to prepare the following documents and file them with the court:

  • a notice of hearing for a bankrupt person’s application for discharge;
  • your affidavit explaining why you believe you are entitled to the discharge order sought;
  • an affidavit of service; and
  • a draft of the order sought.

The Associate Justice/Registrar in Bankruptcy hearing your application for discharge may make any order he or she sees fit. If the order you are seeking is made, he or she may accept and sign it in court on the day you appear, which may save you a period of time later on.

Requisition – Notice of hearing for bankrupt’s discharge from bankruptcy Canada hearing for discharge

The first step in obtaining a discharge in bankruptcy is to file a Notice of Hearing for Bankrupt’s Application for Discharge with the court. That document would have first been filed by the Trustee when the Application for discharge is first scheduled. If you have a copy of it, it will be a good precedent for you to follow.

A requisition must be filed again by you in order to have the matter brought back before the court.

discharge from bankruptcy canada
discharge from bankruptcy canada

Discharge from bankruptcy Canada:The Affidavit

An affidavit is a formal, written statement that provides key information in your legal case. Any evidence you want the court to consider in your application must be submitted in an affidavit. Your affidavit should describe the events leading up to your bankruptcy, and your current financial situation.

You must swear or affirm your affidavit before a notary public or commissioner of oaths. Make sure that your affidavit only includes evidence that is relevant to your application for discharge.

The court is familiar with a standard form of affidavit for discharge applications. You should familiarize yourself with that normal format. You should also include:

  • additional information about why you did not seek a bankruptcy discharge earlier;
  • is this a 1st-time bankruptcy, 2nd-time bankruptcy or more;
  • why you have not been able to comply with the bankrupt’s duties or the requirements of an earlier court order; and
  • state the reasons you are wanting to be discharged now.

You will need to attach any relevant documents to your affidavit in support of your application, including a statement of your current income, expenses, assets, liabilities and any previous bankruptcy information.

Discharge from bankruptcy Canada:Affidavit of Service

To serve documents, you must provide a written copy to the party to be served. You need to obtain a signature or other confirmation, such as an email, to confirm that the document was properly served. You will need to serve the filed Requisition and all filed Affidavits and documents on:

These parties may attend your hearing and make submissions.

In order to provide proper service within the required time period before your discharge hearing, you must familiarize yourself with the rules. You must also provide proof of service at the hearing, especially if no one else attends. This proof of service can be the signature of everyone served to show the date they were served.

An Affidavit of Service can also be filed with the court. This Affidavit of Service is separate from the Affidavit filed with the court regarding your reasons for entitlement to anabsolute bankruptcy discharge certificate.

discharge from bankruptcy canada
discharge from bankruptcy canada

At the discharge from bankruptcy Canada hearing

When you appear in court for your discharge hearing, you will be able to present your case to either an Associate Justice or Registrar in Bankruptcy. If your application is being opposed, the creditors opposing your discharge need to file a notice of opposition. In this case, the hearing will be in front of a bankruptcy Judge. This is the normal process followed:

  1. You explain why you believe you are entitled to the order you are seeking, for example, an absolute discharge from bankruptcy.
  2. Anyone opposing your application explains his or her position.
  3. The Judge or Registrar may ask questions relating to the affidavits and documents you have filed and make suggestions or give directions.

When presenting your position at the hearing, remember to:

  1. Clearly state what order you are seeking from the Registrar in Bankruptcy or Judge.
  2. Outline the facts supporting your application in a concise manner.
  3. Explain the law on the subject and how it applies to the facts of your case.

Your conduct before and during bankruptcy will be taken into consideration when making a decision on your application for discharge. The Trustee’s report will provide information on your conduct before and during bankruptcy, which will be taken into account. if you did not attend the required financial counselling
sessions, did not file required statements of income and expense, and/or did not make the required surplus income payments to the Trustee for the benefit of your creditors.

The court will consider the relevant factors and make the appropriate order, or it may adjourn the hearing for further information or conditions to be met. Some of the types of orders the court may make are:

  • An order of discharge that is absolute and therefore you are immediately discharged from bankruptcy.
  • A conditional discharge may be granted. Examples of conditions are:
    • if the debtor pays any unpaid surplus income,
    • the debtor pays the outstanding balance for any asset that was agreed to be paid for; or
    • if the debtor pays a sum of money to the Trustee toward their debt obligations, as decided by the court.
  • A discharge that has been suspended.
  • The court may refuse to issue a discharge order if it is not satisfied that you have made full and adequate disclosure, or if there are issues with your conduct.

Discharge from bankruptcy Canada: Order for discharge

The Judge or Registrar in Bankruptcy will grant a discharge order at the end of the hearing. The type of discharge will be one of the kinds indicated above. If you prepared a draft order and the Registrar in Bankruptcy or Judge finds it acceptable, they will sign it and you can then have it filed with the court. However, if your application was opposed, keep in mind that one of the opposing parties may choose to appeal the discharge order.

If you have not prepared your order before the hearing, you should do so after the hearing and submit the order in duplicate to the court. The court office will then send the order to the Registrar in Bankruptcy or Judge who heard your application for signing. Once you receive your copy of the signed order, your discharge will be official.

When you receive a copy of the signed order, you must provide a copy to the Office of the Superintendent of Bankruptcy. They will in turn notify the credit bureaus and Canada Revenue Agency of your discharge.

When you have received your absolute discharge, you are no longer legally responsible for repaying debts that you incurred before your assignment in bankruptcy. You will get rid of debt with some exceptions set out in Section 178 of the Bankruptcy and Insolvency Act. They are:

  • payment of child support or alimony;
  • student loans, if you have not been a full-time or part-time student for less than 7 years;
  • a fine or penalty imposed by the court; or
  • debt resulting from fraud.

    discharge from bankruptcy canada
    discharge from bankruptcy canada

Discharge from bankruptcy Canada: Are you tired of being in debt?

Bankruptcy law and the bankruptcy process can be complex, so it may be worth retaining a bankruptcy lawyer to help you apply for your discharge. Ultimately, it is up to you, but hopefully, this guide to discharge from bankruptcy Canada will lay out the steps you need to take if you wish to apply for a discharge yourself.

I hope that you found this discharge from bankruptcy Canada Brandon’s Blog informative. If you’re sick and tired of carrying the burden of debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We are aware of your financial difficulties and understand your concerns. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to give you the best management advice to get you out of your outstanding debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We are sympathetic to the financial difficulties you are experiencing and would like to help alleviate your concerns. We want to lighten your load by coming up with a debt settlement plan crafted just for you.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation. We are licensed professionals.

discharge from bankruptcy canada
discharge from bankruptcy canada
Categories
Brandon Blog Post

SUSPENSION OF DISCHARGE FROM BANKRUPTCY: OUR COMPLETE GUIDE ON BANKRUPTCY DISCHARGES

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: Bankruptcy discharge and what it means for the bankrupt

The implications of an absolute bankruptcy discharge on the debtor are significant. Once an absolute discharge is granted, the debtor is no longer liable for any unsecured debts that existed at the date of bankruptcy. The debtor is released from having to repay any debts that they incurred before filing for bankruptcy.

This means that the debtor no longer has to worry about repaying those debts and can move on with their life. This provides a fresh start for the debtor and helps them get back on their feet.

There are different types of bankruptcy discharges. The one every bankrupt person wants is an absolute discharge. However, sometimes there is a reason for either a creditor, the licensed insolvency trustee (formerly called a trustee in bankruptcy) (Trustee), or both, to oppose a bankrupt person’s discharge. When this happens, there must be a court hearing to determine what form of discharge the bankrupt is entitled to.

The purpose of the discharge hearing is for the court to view the evidence put forward by those opposing an absolute discharge, the bankrupt who believes they are entitled to one and to review the Trustee’s report and gain further information about the conduct of the bankrupt person, both before and during bankruptcy, and to hear about the administration of the bankruptcy.

At the discharge hearing, the court is attempting to balance the right of a bankrupt person to receive a discharge and the rights of the creditors to be paid. The court will also be concerned that the administration of the bankruptcy is not only fair to all parties but is also seen to be fair. I recently came across a decision of the Court of King’s Bench of Alberta which exemplifies this finding of balance.

In this Brandon’s Blog post, I’m discussing what it means when a bankrupt person is discharged, as well as the process and different types of discharges. One type of discharge that a bankrupt person can be given is a suspension of discharge from bankruptcy taking place. I’m also highlighting this recent court decision that demonstrates the balance and fairness that the courts strive for.

Suspension of discharge from bankruptcy: When can a bankrupt person be discharged?

If you have filed for bankruptcy for the first time, you may qualify for an automatic discharge after a 9 month bankruptcy period. To qualify for this automatic discharge, you must have:

  • attended the two mandatory financial counselling sessions with the Trustee;
  • no requirement to pay surplus income, being a portion of their income is paid to the bankruptcy estate according to guidelines set by the Office of the Superintendent of Bankruptcy (OSB or Official Receiver); and
  • no opposition to his or her discharge.

The only party that can authorize an automatic discharge in bankruptcy is the Trustee.

If you have made an assignment in bankruptcy before and so this subsequent bankruptcy is your 2nd bankruptcy, you will need to wait at least 24 months before you can receive a discharge. If you have a surplus income payment requirement, your bankruptcy will be prolonged to 36 months.

If you have filed for bankruptcy twice before, you can expect the timeline for a third bankruptcy to be the same as your 2nd. However, the Trustee or creditors may be more resistant to your discharge this time. The court may extend the timeline if it deems necessary.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: When is a discharge challenged?

The Trustee may oppose a bankrupt’s discharge by issuing a notice of opposition. This means that the bankrupt did not fulfill all of their duties when the time came for the Trustee to make a determination if the bankrupt is entitled to a discharge.

If one or more creditors oppose the debtor’s bankruptcy discharge, they may believe that additional information is needed to be evaluated by the court in order to determine what kind of discharge, if any, the debtor should receive.

The court will then decide what kind of bankruptcy discharge the bankrupt should receive.

Suspension of discharge from bankruptcy: What are the different types of discharge that can be granted in bankruptcy proceedings?

There are different kinds of discharge from bankruptcy process. They are:

  • Absolute discharge: you are entitled to an immediate discharge;
  • Conditional discharge: you can obtain a discharge after fulfilling one or more conditions;
  • Suspension of discharge from bankruptcy – a suspended discharge from bankruptcy means that the discharge will occur at a later date set by the court, and will be combined with either an absolute bankruptcy discharge or conditional bankruptcy discharge;
  • Refused discharge – the court can refuse the bankrupt’s discharge due to unsatisfactory fulfillment of duties and lack of response to the Trustee’s inquiries; or
  • “no order” – the Trustee has advised the court that, despite the passage of time, the bankrupt has not fulfilled all of his or her duties, has failed to respond to the Trustee’s requests, and the Trustee wishes to seek its discharge.

The bankrupt’s discharge in bankruptcy occurs when the bankrupt person has fulfilled the conditions set by the court and/or the suspension of discharge from bankruptcy period has ended.

The duration of bankruptcy depends on all of the above factors.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: There are five types of debt that are not dischargeable in bankruptcy

What debts cannot be discharged through bankruptcy? There are 5 types of debts that cannot be discharged. They are:

  1. alimony or child support payments;
  2. penalties or fines set by the court;
  3. claims from fraud or fraudulent breach of trust;
  4. student loan debt if it is less than 7 years since you stopped being a full-time or part-time student; and
  5. Any debts that are properly secured by an asset are not released as a result of a bankruptcy discharge.

There are five types of debt that are not discharged in bankruptcy. The debtor will need to continue paying these financial obligations according to their terms. For all other unsecured debts, the discharge from bankruptcy will discharge all those debts.

Suspension of discharge from bankruptcy: The opposed bankruptcy discharge process case

The decision was released on September 29, 2022, in Wasylynuk (Re), 2022 ABKB 650 (CanLII), For me, this Court of King’s Bench of Alberta (it is still going to take me time to get used to the switch from “Queen” to “King”!) by the Registrar in Bankruptcy, epitomizes the balance the court strives to find in bankruptcy discharge situations.

This is an application for a bankrupt’s discharge which is opposed. The bankrupt, Ms. Wasylynuk, has completed all required duties. She is a first-time bankrupt with a surplus income requirement. The bankruptcy was driven by litigation costs when Ms. Wasylynuk unsuccessfully sued her surviving brothers and sisters for a share of her father’s estate.

The bankrupt filed a challenge to her father’s will and the disposition of his property in 2008. This led to 10 years of litigation for a share of the estate. All of the estate had been given to one of her brothers, who was tasked with caring for the father and, after his passing, dividing it as he saw fit. Ms. Wasylynuk rejected her brother’s offer of a share, wanting more.

Prior to her bankruptcy, Ms. Wasylynuk brought an application, presumably based on legal advice she received, to set aside her father’s will and an inter vivos gift made by her father that gave everything to one of her siblings. The will and the gift were both drawn up by lawyers with doctors’ certificates of competence and capacity. The will and the gift were upheld by the lower court. The lower court’s ruling was upheld on appeal. The Supreme Court of Canada refused to hear the case.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: The opposition to bankruptcy discharge and the evidence

The bankrupt’s siblings are the opposing creditors. The opposing creditors dispute Ms. Wasylynuk’s characterization as an honest but unfortunate debtor. Their grounds for opposition are:

  • The value of the bankrupt’s assets does not equal fifty cents on the dollar of the bankrupt’s unsecured liabilities, and the bankrupt is responsible for the circumstances that caused this.
  • Ms. Wasylynuk has not been able to provide an explanation for the disappearance of assets, or for why there are not enough assets to cover debts.
  • She was eligible to make a proposal under the Bankruptcy and Insolvency Act (Canada) (BIA) rather than bringing on this bankruptcy process but did not.

The evidence included the fact that, during the litigation, the bankrupt employed several different law firms and did not pay most of the legal fees she incurred. At the time of her bankruptcy, she owed in excess of $200,000 for unpaid legal fees. In her bankruptcy filing, she claimed $5,500 in assets, consisting of a motor vehicle, furniture, and personal effects, all of which were exempt.

Another bit of evidence was that Ms. Wasylynuk had likewise allowed a charge to be registered against the home in favour of her spouse to support his alleged loans to her of $277,000.00. Mr. Wasylynuk additionally declared an unsecured amount of $152,365.00 for loans to her. There were no documents to validate the amount. The Registrar noted that he was skeptical of these alleged loans as most of the bankrupt’s legal fees were unpaid.

On top of this, 13 months prior to her making her bankruptcy assignment, she transferred her half share of the matrimonial home to her husband. The bankruptcy Trustee did not have the funds to attack the transfer in the current bankruptcy administration.

Ms. Wasylynuk’s siblings’ litigation costs totalled approximately $750,000.00. The costs awarded from the first instance through the appeal will cover less than a third of those costs.

The Registrar calculated that, under Alberta law, the bankrupt’s non-exempt equity in the matrimonial home at the time of transfer to the spouse was approximately $118,000.00.

Suspension of discharge from bankruptcy: The balancing act of the Registrar’s decision

The Registrar took note of the above and made several findings. First was that Ms. Wasylynuk, 59, is a specialized nurse in a teaching position. She makes nearly $60 per hour. She continues to live in her fully encumbered matrimonial home with her husband, which is now out of reach of her creditors.

The Trustee explained that a proposal was ruled out because the litigation between Ms. Wasylynuk and her siblings that led to this bankruptcy was highly acrimonious. The Registrar found that it is unclear whether a proposal would have been doomed to failure because of ill will between the siblings, particularly since a proposal would have resulted in a better result for the creditors than her bankruptcy.

Ms. Wasylynuk has paid $51,000 into the estate over her 21-month bankruptcy. Her monthly surplus is $2,000. At that surplus rate, a 60-month proposal would have achieved $120,000 for her creditors or about the value of her non-exempt portion of the matrimonial home.

So to balance the scales, the Registrar gave Ms. Wasylynuk a conditional discharge. Ms. Wasylynuk’s discharge is conditioned upon her paying an additional $60,000.00 into the bankruptcy estate at the rate of a monthly payment of $2,000.00. By ordering these additional payments, once they are all made, the amount paid into the bankruptcy estate will be roughly equal to the minimum amount she would have paid if she chose to make a proposal over bankruptcy.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy

Suspension of discharge from bankruptcy: Ready to be debt-free?

I hope that you found this suspension of discharge from bankruptcy Brandon’s Blog informative. If you’re sick and tired of being in debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts, Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We know that you are worried because you are facing significant financial challenges. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to give you the best management advice to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. We know that we can help you the way we take the load off of your shoulders and devise a debt settlement plan.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation. We are licensed professionals.

suspension of discharge from bankruptcy
suspension of discharge from bankruptcy
Categories
Brandon Blog Post

WHAT DOES BANKRUPTCY DISCHARGED MEAN FOR 1 BANKRUPTCY TRUSTEE AND SOMEONE WHO IS SERIOUSLY BANKRUPT?

 

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

What does bankruptcy discharged mean: Restrictions placed on undischarged bankrupts

By enabling debtors to file an assignment in bankruptcy or consumer proposal, the Bankruptcy and Insolvency Act (BIA) provides relief to an honest but unfortunate debtor. Garnishment of wages (other than marital support) ceases, legal actions and collection calls cease, and the debtor receives some breathing space. If a bankrupt fails to fulfill his or her obligations, what happens? Can they receive a discharge from bankruptcy?

This Brandon Blog examines a recent case from Nova Scotia dealing with what does bankruptcy discharged mean for both a bankrupt person and for the licensed insolvency trustee. I also describe what does it mean for an undischarged bankrupt if the bankruptcy trustee gets its discharge when the bankrupt person does not have their bankruptcy discharge.

I will eventually get to the Court case, but there is first some background information that I will provide which sets the stage for a better understanding of the Court decision.

What does it mean to be an undischarged bankrupt?

In the event, you were unable to fulfill your obligations under your personal bankruptcy proceedings, your Trustee, and maybe a creditor or two would have opposed your discharge from bankruptcy. A bankrupt who has not been discharged poses many potential problems. Therefore, if you are an undischarged bankrupt, it is because you have failed to fulfill one or more of your obligations as a bankrupt.

what does bankruptcy discharged mean
what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts eliminated by bankruptcy discharge

A bankruptcy discharge means that you have completed your personal bankruptcy process and are no longer legally liable for any outstanding debt you included in the bankruptcy filing (with the exception of a few which I will describe soon). Upon receiving an absolute discharge from bankruptcy (we’ll get to that shortly), you are no longer responsible for any discharged debts.

The discharge in bankruptcy eliminates most of your debts, including unsecured debts such as credit card bills, medical bills, and payday loans. When you are discharged from bankruptcy, not the fact that you filed for bankruptcy, is what eliminates your debts. You need your discharge to get rid of your debts, which explains why it’s so important. That is what does bankruptcy discharged mean, really means.

What does bankruptcy discharged mean: Bankruptcy law can resolve tax debts

As well as the usual unsecured debts mentioned above, if you owe Canada Revenue Agency (CRA) money because you were not able to pay your whole personal income tax obligation when you filed your taxes, then a payment arrangement makes sense.

Collections officers from the CRA contact taxpayers regarding outstanding income tax debt arising from their tax filings and notices of assessment. They attempt to collect from delinquent taxpayers. When you say that you cannot pay the full amount at that time, they will offer you the option of a payment arrangement. The interviewer will ask you about your financial situation and may ask you to submit documents to support your income and expense claims.

They recommend a settlement plan after evaluating the information. Only if all attempts at collection have failed will legal action be taken. You must send the CRA postdated cheques to cover the agreed-upon monthly payment to participate in such a plan. Additional payments can be made if you have money to spare. The interest clock does not stop with a CRA payment plan. Be certain that all your cheques clear the bank as well. The entire payment plan can be cancelled if only one is returned NSF.

Should you enter into a payment plan? Yes. You should demonstrate to CRA that you want to work with them, and avoid tax debt collection activities that will disrupt your life. The most common enforcement activity involves freezing and taking money from your bank accounts, as well as garnishing your salary or wages if you’re employed. If you are a proprietor, they can notify your customers and claim your receivables. Furthermore, a federal judgment can be obtained without your knowledge to place a lien on your home.

You do not need to experience CRA’s more drastic collection methods. Be sure to pay your obligations on time. A tax garnishment, third-party assessment, or an asset lien is never pleasant. The consequences are severe and disruptive. In most cases, CRA only takes this step if you fail to comply with their efforts to enter into and maintain a CRA payment arrangement.

CRA tax debts can be discharged under bankruptcy law if no payment plan can be arranged. If bankruptcy is successfully discharged or a consumer proposal is fully completed, the income tax debt can be eliminated. We assume that CRA hasn’t already obtained a judgment against your interest in your home and registered it against it. Upon doing so, the CRA has successfully turned an unsecured debt into secured debt, and bankruptcy law no longer applies.

Several other things to keep in mind are:

  • A bankrupt who owes more than $200,000 in personal income taxes and whose personal income tax debt represents at least 75% of their total unsecured proven claims is considered a high-tax debtor. In this situation, you cannot be automatically discharged. It is unavoidable that the Trustee will object to your discharge and there will be a discharge hearing before the Bankruptcy Registrar in the Bankruptcy Courts. Additionally, the CRA will oppose your discharge and will make submissions at your hearing. I am certain you will receive a conditional discharge, at least with the condition that you pay a portion of your income tax debt to the Trustee for distribution among your creditors.
  • Unremitted employee source deductions owed by a proprietor or partner of an unincorporated business will not be helped by bankruptcy law. Generally, bankruptcy will eliminate HST obligations. For now, CRA ranks the debt as unsecured in a consumer proposal, but as CRA provides the accommodation, it is not a part of bankruptcy law. If the outstanding HST is extremely large, the CRA may argue that since you held the HST in trust for them, it still remains a claim even if you declare bankruptcy. Under Canadian bankruptcy law, they can do this, but I have not seen them do it yet.
  • Director liability for unremitted employee source deductions or HST is an unsecured claim against you for your personal liability as a Director. Bankruptcy and a properly worded Proposal will both eliminate that debt.

    what does bankruptcy discharged mean
    what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts never discharged in bankruptcy

In personal bankruptcy, there are certain types of debts that are not discharged. Section 178(1) of the BIA outlines the following debts that are nondischargeable debt:

  • Any type of fine, penalty, restitution order, or other order similar to a fine, penalty or restitution order, imposed by a court for an offence, or any kind of debt arising from a recognizance or bond;
  • Damages awarded by a court in a civil case for:
    • bodily injury intentionally caused, or sexual assault, or
    • wrongful death as a result of these acts;
  • the payment of spousal support or an alimentary pension;
  • any financial obligation or liability arising under a judgment establishing an association or regarding support, maintenance, or an agreement for maintenance and support of a spouse, former spouse, previous common-law partner, or child who is not living with the bankrupt;
  • a financial obligation or liability that results from fraud, embezzlement, misappropriation or defalcation in a fiduciary capacity or, in the Province of Quebec, while acting as a trustee or administrator;
  • apart from debts and responsibilities arising from equity claims, any debt or liability resulting from getting property or services by false pretenses or fraudulent misrepresentation;
  • unless a creditor had notification or understanding of the bankruptcy and didn’t take reasonable action to prove a claim, the liability for the dividend that a creditor would have received on any provable claim not disclosed to the trustee; or
  • student loans if the bankruptcy occurred before the bankrupt stopped being a full- or part-time student or within seven years of the date the bankrupt stopped being a full- or part-time student.

What does bankruptcy discharged mean: Absolute discharge vs. conditional discharge and so on and so forth

In order to obtain a discharge, a bankrupt person must have fulfilled all of their bankruptcy duties. These personal bankruptcy duties include:

  • providing all books, records or documents to the Trustee that identify the assets and liabilities of the debtor;
  • prepare and submit to the Trustee within 5 days after filing for personal bankruptcy, unless the Office of the Superintendent of Bankruptcy Canada extends the time, a sworn statement of affairs detailing the person’s assets and liabilities, and for each of the bankrupt’s creditors, their respective names, addresses and the amount owing;
  • disclose to the Trustee complete details of all dispositions of property within 1 year before the date of the bankruptcy;
  • make a disclosure to the Trustee of all the details of property disposed of by gift or settlement without adequate valuable consideration within a 5 year time period before the date of bankruptcy;
  • if a creditors’ meeting is called, attending it;
  • making any required surplus income payments to the Trustee;
  • participating in two mandatory financial counselling sessions; and
  • offering whatever assistance is requested by the Trustee.

If the bankrupt fulfill all of their duties, then the Trustee will not have a reason to oppose the discharge. If no creditor opposes, then the bankrupt is entitled to an absolute discharge. As already stated, the discharge is what eliminates unsecured debts.

In addition to an absolute discharge, there are other types of discharge under bankruptcy law available to a bankrupt person upon having a discharge hearing:

  • conditional discharge;
  • suspended discharge; and
  • refused discharge.

To read more on the different kinds of discharges available to be applied to a bankrupt person, and for what does bankruptcy discharged mean, take a look at my August 2021 Brandon Blog “A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON“.

what does bankruptcy discharged mean
what does bankruptcy discharged mean

What does bankruptcy discharged mean: At long last, the Nova Scotia case

The Nova Scotia bankruptcy case deals with the discharge of the Trustee in a personal bankruptcy matter. Once the Trustee brings on the bankrupt’s application for discharge and a discharge Order is made by the Court, and the Trustee completes the rest of the administration of the bankruptcy estate, the Trustee is entitled to a discharge. If the bankrupt did not receive an absolute discharge and has not completed his or her duties, including complying with a conditional discharge order, eventually, the Trustee can still apply for its discharge. Upon the Trustee’s discharge two things occur:

The bankrupt goes into bankruptcy purgatory. No discharge occurs. The Trustee has fulfilled its obligation to present the bankrupt’s discharge request to the court and the court has issued an Order. Whenever the bankrupt wants to prove they have fulfilled all their obligations, obeyed the discharge order, and now deserve an absolute discharge, he or she will need to retain a bankruptcy lawyer and apply to the Bankruptcy Courts.

On the day the Trustee is discharged, the stay of proceedings that had protected the bankrupt from any enforcement action by creditors whose debts were owed at the date of bankruptcy no longer applies. As a result, creditors can now pursue the bankrupt person since the debts have not been eliminated and the stay of proceedings is no longer in place.

It is interesting to examine how far the Registrar in Bankruptcy directed the Trustee in this Nova Scotia bankruptcy case to ensure that all creditors understood that they still had the right to pursue the bankrupt.

The decision in Frost (Re), 2021 NSSC 296 can be boiled down to the following facts:

  • Mr. Frost went bankrupt.
  • He failed to fulfill his duties and moved to the UK permanently.
  • He didn’t inform the Trustee of his new address and telephone number.
  • His actions left his Trustee and other stakeholders to fend for themselves, explicitly telling the Trustee he wasn’t going to fulfill those duties and didn’t intend to do so.
  • A hearing was held for the bankrupt’s discharge and Mr. Frost was refused discharge.
  • The Court previously directed the Trustee to appear before it to be heard on the Trustee’s application for discharge.

The Court concluded that the Trustee completed the administration of the bankruptcy estate and gave the Trustee its discharge. However, the reason why the Registrar in Bankruptcy wanted the Trustee to attend such a hearing was so the Registrar could take things one step further. In the normal course, the Trustee sends out a notice to all those whose proof of claim was admitted of the results of the bankruptcy administration and of the Trustee’s discharge. However, the Registrar wanted to make sure that it was crystal clear to all creditors.

The Registrar wrote a cover letter for the Trustee and directed the Trustee to send it along with the normal statutory notice to creditors (or their debt collectors of record). Here is a copy of that letter:

what does bankruptcy discharged mean
what does bankruptcy discharged mean

What does bankruptcy discharged mean summary

I hope you found this what does bankruptcy discharged mean Brandon Blog post informative. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? If it is too much debt for any reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

what does bankruptcy discharged mean
what does bankruptcy discharged mean
Categories
Brandon Blog Post

A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON

bankruptcy discharged
bankruptcy discharged

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would like to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Your Bankruptcy Discharged – But Wait

Well, that took no time at all. Last week I told you about a bankruptcy discharge hearing I attended where the bankrupt person had his bankruptcy discharged by the Master in the Ontario Superior Court of Justice In Bankruptcy and Insolvency.

The Master’s decision was released on August 13, 2021. On August 20, 2021, we received the Notice of Motion of the opposing creditor appealing the Master’s decision to give this person his discharge from bankruptcy. That is their right.

In this Brandon Blog, I want to discuss the reasons for the opposition to the fact that this bankrupt had his bankruptcy discharged and my thoughts on one scenario of how this may play out. First, I just want to refresh your memory about the bankruptcy process and specifically how the discharge under bankruptcy law in Canada process works. Then I will get into this real-life story.

Canada’s Bankruptcy and Insolvency Act (BIA) gives people the option of filing a debt management plan restructuring consumer proposal if they are unable to pay back all unsecured debt owing to their unsecured creditors. This option offers the consumer a way to maybe keep their home and car that is heavily financed, as long as they can maintain the payments to the secured creditors such as the financial institution who financed the purchase of the home by way of the mortgage, or the auto loan, and it makes sense in their budget.

A successful consumer proposal is also the way to avoid bankruptcy. Like bankruptcy, the process starts with a no-cost consultation for financial advice with a licensed insolvency trustee. A licensed trustee is the only party able to administer a consumer proposal in Canada (or a bankruptcy). The Trustee can help you lose your debt load.

A first-time bankrupt who fulfills all of their obligations, including attending 2 mandatory credit counselling sessions, is entitled to a discharge after 9 months from the date of bankruptcy.

bankruptcy discharged
bankruptcy discharged

A bankruptcy discharged: First and second bankruptcy (or more)

When an insolvent debtor files for bankruptcy for a second time, you cannot be discharged after a nine months bankruptcy period. When you don’t need to pay the Trustee any surplus income payments, a second bankruptcy lasts for a minimum of 24 months. A second-time bankruptcy filer with surplus income must make those payments for 36 months to qualify to get their bankruptcy discharged.

A third or subsequent bankruptcy follows the same timeline as a second bankruptcy. There is, however, a high probability that the Trustee or creditors will oppose the discharge. Where there is opposition, there must be a court bankruptcy discharge hearing and the court can impose any conditions it deems appropriate.

What does bankruptcy discharged mean in Canada?

It is a Canadian legal term used to describe the release of a consumer debtor or business proprietorship from their obligations, responsibilities, debts, and legal claims. “Bankruptcy” is a legal proceeding to protect the estate of a person or company. “Discharge” fulfills the requirement that a person is released from their obligations, responsibilities, debts, and legal claims through the bankruptcy process. There is no equivalent requirement for a company.

The insolvent debtor filing for bankruptcy merely invokes the legal protection to the person and puts a bankruptcy trustee in place to realize upon any available assets in the bankruptcy estate for the benefit of the creditors. Bankruptcy filings do not relieve the person of their debts. It is when the person is bankruptcy discharged, that they are released from their debts (other than for a select list of exceptions).

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged: Types of bankruptcy discharge

The licensed insolvency trustee can usually issue an automatic discharge when there is no trustee in bankruptcy opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties during bankruptcy.

In case of opposition or if the bankrupt meets one of the criteria that prevents automatic discharge (for example, the bankruptcy process finds the bankrupt to have a high tax debt situation), a discharge hearing in court is held, which is conducted by the Master of the Bankruptcy Court. There are four types of the bankruptcy discharge and a fifth outcome is also possible. Here they are:

  1. Absolute discharge – An absolute discharge means that the bankrupt may obtain a discharge immediately. If the bankrupt has fulfilled all of their duties and there is no insolvency trustee or creditor opposition, this can be provided by the licensed insolvency trustee of the bankruptcy estate handling the bankruptcy administration;
  2. Conditional discharge – can get discharged if certain conditions are met. Typically, to get bankruptcy discharged this way, conditions include payment to the licensed insolvency trustee;
  3. Suspended – the bankruptcy discharge will be granted at a later date and may very well be combined with an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. Refused– because the debtor has not made full disclosure or done other bankruptcy duties; or
  5. “No order” – the insolvency trustee informs the court that the bankrupt has not fulfilled all of his or her obligations and has failed to respond to the Trustee’s demands for information despite the passing of time. The licensed insolvency trustee is at liberty to seek its discharge when the “no order” order is provided. When the bankrupt has actually complied with the court’s requirements, he or she may apply for a hearing for discharge. When the Trustee gets its discharge, the stay of proceedings preventing collection actions against the bankrupt disappears.

A bankruptcy discharged: The appeal just served upon us – a true story

To refresh your memory about the discharge hearing itself you can CLICK HERE. The appeal just served upon us seeks an Order setting aside the decision of the Master made on August 13, 2021. The grounds for the appeal can be described as throwing everything including the kitchen sink! The stated grounds are that the Learned Registrar erred:

  • by granting the bankrupt an absolute discharge from bankruptcy;
  • in holding that the Receiver’s interest in the discharge application is not firmly established and by not recognizing that should the Receiver be paid an amount in excess of the debt owed to the secured creditor, any surplus funds would be available for the other creditors of the
    corporate bankruptcy estate;
  • in holding that the discharge hearing is not the proper forum in which to make determinations as to the propriety of the various transactions that the Receiver has raised;
  • in finding that the bankrupt has generally cooperated with me as his Trustee;
  • in declining to consider the bankrupt’s conduct in the corporate bankruptcy because that the trustee in the corporate bankruptcy had remedies available to it;
  • in finding that the failure of the company’s business was due to the loss of its 1 customer and pricing related to that arrangement;
  • in relying on her finding that the corporate trustee may be the only truly interested party on the discharge or would benefit most from the conditional order sought if the secured debt is otherwise repaid;
  • in exercising her discretion in finding that an order of discharge requiring payment of the significant amount proposed by the Receiver is not reasonable;
  • in finding that the bankrupt has no ability to pay and that his future prospects to pay are unknown;
  • in finding that an order for a conditional discharge of the magnitude sought would be tantamount to a refusal;
  • by omitting to consider relevant evidence or the absence thereof, in relying on irrelevant considerations, and/or giving improper weight to the evidence before the Court; and
  • anything else the lawyers may want to say.

    bankruptcy discharged
    bankruptcy discharged

Standard of review to getting a personal bankruptcy discharged

Such an appeal from a bankruptcy discharge hearing has a standard of review. According to BIA S. 192(1), the bankruptcy registrar can, among other things, grant orders of discharge. S. 192(4) of the BIA permits a party dissatisfied with a registrar’s order or decision to appeal it to a judge.

Registrars are exercising judicial discretion when granting discharges in bankruptcy cases. As long as the registrar acted reasonably, the judge should not set it aside or ignore it. Furthermore, if an appeal from a bankruptcy discharge order is based on alleged errors in factual findings, the court will not intervene if the findings of fact can be justified based on credible evidence. If the registrar has materially misinterpreted the law or made an error in respect of the facts underpinning his or her discretion, discretionary decisions can, of course, be overturned.

If the registrar decides that in order for the person to get their bankruptcy discharged, the court imposes conditions, those conditions must be realistic to allow the bankrupt to meet the requirements in a reasonable amount of time. If an amount ordered in order for the person to get their bankruptcy discharged is unrealistic and the discharge is conditional on making additional payments, the appellate court in such cases previously held that results in an error of law. The appellate judge can either substitute other conditions or refer the matter back to the registrar for reconsideration.

A bankruptcy discharged: What my gut is telling me

I normally am not in the prediction business. However, having been the insolvency trustee responsible for administering the consumer bankruptcy, having written the reports to the court on the bankrupt’s application for discharge, having attended the discharge hearing and having heard all the evidence, having read the Registrar’s decision and the Appeal documentation, I believe that the appeal should be dismissed.

You might recall that opposing the bankrupt getting bankruptcy discharged was the Receiver of the company previously operated by the bankrupt. As a result of complaints regarding the bankrupt and his family in relation to the company’s operations, the Receiver has filed lawsuits against several parties. The proceedings are still pending. According to previous court rulings, the court should not consider the issues raised in other proceedings when deciding whether to discharge the bankrupt. A discharge hearing is a summary proceeding. It is important to see how the debtor behaved during HIS bankruptcy.

As for the judge’s decision, only time will tell. I’ll keep you up to date as always.

bankruptcy discharged
bankruptcy discharged

Bankruptcy discharged summary

I hope that you found this bankruptcy discharged Brandon Blog helpful in telling this real-life story of an appeal to a person getting their bankruptcy discharged. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as an alternative to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

 

Categories
Brandon Blog Post

BANKRUPTCY DISCHARGE ORDER: OBSESSED CREDITOR LOSES APPEAL OF THE DISCHARGE ORDER

bankruptcy dischargeWe hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

What does bankruptcy discharge mean in Canada?

A bankruptcy filing is a form of insolvency process under Canadian bankruptcy law available to individuals and businesses. Bankruptcy deals with a person’s or company’s debt load and assets. After performing a detailed initial assessment, the licensed insolvency trustee will be in a position to advise the debtor if they will be better serviced through a restructuring process as an alternative to bankruptcy (consumer proposal or Division I Proposal for individuals, Division I Proposal or Companies’ Creditors Arrangement Act bankruptcy protection for companies) with creditors, or whether the debtor will be better served filing for bankruptcy.

The final piece of any bankruptcy process for an individual is the bankruptcy discharge. Individuals who go bankrupt are entitled to a discharge from bankruptcy. Companies are only entitled to one if every bankruptcy claim filed is paid in full, with interest. Because this never happens, companies do not receive a bankruptcy discharge. It is not impossible, but for this reason, it really does not happen.

If you are thinking about filing an assignment in bankruptcy, then you may be wondering about the bankruptcy discharge process and how it will affect you. Many people think their debts are eliminated at the moment of their bankruptcy filing.

This is incorrect. It is the bankruptcy discharge that will remove all (with certain limited exceptions) of your unsecured debts from your life and will result in letting you move forward with a clean slate. In this Brandon Blog, I discuss the bankruptcy discharge process and a recent decision of the Supreme Court of British Columbia hearing an appeal to the decision of the Master sitting as bankruptcy registrar on a bankrupt’s application for discharge.bankruptcy discharge

Bankruptcy discharge and its consequences for the bankrupt

When you are granted a bankruptcy discharge, this means that those debts caught by your bankruptcy are no longer your responsibility. This means that every action from creditors or the collection agencies they have retained stops trying to collect the debt obligations.

As I previously mentioned, most almost all debts are wiped off your slate when you receive your discharge from bankruptcy. The kinds of debts that remain even after a bankruptcy discharge are:

  • spousal or child support payments;
  • fines or penalties mandated by the court;
  • claims arising from fraud or fraudulent breach of trust;
  • student loan debt if less than 7 years have passed since the bankrupt stopped being a part-time or full-time student.
  • any kind of financial debts that are secured against your assets, such as a home mortgage or automobile financing, are not discharged as a result of your bankruptcy discharge.

These sorts of financial debts endure after bankruptcy as they are not released. The individual will be required to continue paying those financial obligations according to their terms. All various other financial obligations are discharged and do not have to be paid.

What are the types of bankruptcy discharge?

If there is no Trustee opposition or creditor opposition to a bankrupt’s application for discharge, and the bankrupt has fulfilled all of their duties of a bankrupt, in most situations, the licensed insolvency trustee can issue an automatic discharge which provides the bankrupt with an absolute discharge from bankruptcy.

If there is an opposition or the bankrupt meets one of the criteria that does not allow for an automatic discharge (such as the bankruptcy process finding the bankrupt a high income tax debt situation), there must be a discharge hearing in court which is heard by a Master of the court sitting as the registrar in bankruptcy. There are 4 types of bankruptcy discharge and a 5th bankruptcy outcome is also possible. They are:

  1. absolute – an absolute discharge means the bankrupt is entitled to an immediate discharge. This can be given by the licensed insolvency trustee in the bankruptcy estate handling the bankruptcy administration if the bankrupt has fulfilled all of their duties and there is no trustee or creditor opposition;
  2. conditional discharge – can get a discharge after meeting one or more conditions. The most common type of condition of discharge involves paying a sum of money to the licensed insolvency trustee;
  3. suspended – the bankrupt’s discharge will take place at a later date and may very well be combined with either an absolute bankruptcy discharge or conditional bankruptcy discharge;
  4. refused– the court refused to grant a bankruptcy discharge probably because the bankrupt has failed to provide full disclosure or perform other bankruptcy duties; or
  5. “no order”– the Trustee advises the court that regardless of the time period that has passed, the bankrupt has actually not satisfied every one of his or her obligations and the bankrupt has actually failed to reply to the Trustee’s demands for information. In this situation, when the “no order” order is provided, the licensed insolvency trustee is at liberty to seek its discharge. Once the bankrupt person has actually fulfilled the requirements set by the court, the bankrupt can re-apply for a discharge hearing by the court.bankruptcy discharge

For a first-time bankrupt with no surplus income who fulfills of their duties, including attending the 2 mandatory credit counselling sessions, they are entitled to their bankruptcy discharge after a bankruptcy period of 9 months from the date of bankruptcy.

If this is your second bankruptcy a discharge will not be available after 9 months. A 2nd bankruptcy lasts for a minimum of 24 months if you do not have any surplus income payments to make to the Trustee. If you have surplus income, a second-time bankrupt must make those monthly payments for 36 months before they are entitled to a bankruptcy discharge.

For a 3rd or subsequent bankruptcy, the timeline is the same as the 2nd time bankrupt. However, it is much more possible that there will certainly be resistance to the discharge by the Trustee or the creditors. The court can also impose whatever conditions it sees fit.

Creditor objects to the decision of the Master on bankrupt’s application for discharge

On July 9, 2021, the decision in Hanlon (Re), 2021 BCSC 1348 in the Supreme Court of British Columbia was released. This was an appeal from an order by the bankruptcy registrar of the Supreme Court of British Columbia dated April 28, 2021 in Hanlon (Re), 2021 BCSC 800, VA B190492. This is an appeal under s. 192(4) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA), from an order of a master of that Court, sitting as a registrar in bankruptcy, granting the bankrupt, Mr. Hanlon, a bankruptcy discharge that was made conditional on his paying $7,500 to the Trustee.

The appellant, Ms. Johnson, is one of Mr. Hanlon’s creditors. She states that the registrar erred in approving the discharge on those terms. If the appeal is allowed, she looks for an order refusing Mr. Hanlon’s application for a discharge, with leave to apply again in two years, or alternatively, giving a discharge conditional on his paying $50,000. The appeal is opposed by both Mr. Hanlon the bankrupt, and the Trustee. The appeal was heard by Judge Milman, Canada’s bankruptcy legislation, the BIA states that a person dissatisfied with an order or decision of a registrar can appeal that decision to a judge of that court who in that capacity is sitting as a bankruptcy judge.

The alleged errors made by the registrar in the making of the order of conditional discharge

Ms. Johnson argued that the registrar made certain errors in granting the conditional bankruptcy discharge order. Ms. Johnson says that in granting the bankruptcy discharge on those terms, the registrar erred as follows:

  • in concluding that Mr. Hanlon had complied with the injunction resulting from Ms. Johnson’s original successful litigation against Mr. Hanlon when he had not;
  • in falling short to take into account Mr. Hanlon’s refusal to agree with the accuracy of the trial judge; and
  • in failing to consider Mr. Hanlon’s real income earning potential.bankruptcy discharge

The standard of review on such an appeal

There is a standard of review on such an appeal from an order of a bankruptcy discharge hearing. S. 192(1) of the BIA gives the bankruptcy registrar the authority to, amongst other things, grant orders of discharge. S. 192(4) of the BIA allows a party dissatisfied with an order or decision of a
registrar may appeal it to a judge.

In granting an order of discharge in the bankruptcy process, the registrar is exercising judicial discretion. If the registrar has acted reasonably, the judge should not set it aside or ignore it. Further, if an appeal from a bankruptcy discharge order is based on alleged errors in findings of fact, the court will not interfere if there is no overriding error in the findings of fact and there is evidence from which the findings of fact could be made. Discretionary decisions may, naturally, be overturned if the registrar has materially misinterpreted the law or made an error in respect of the facts underlying the use of that discretion.

When a registrar’s decision in a bankruptcy discharge hearing imposes conditions, those conditions must be realistic for the bankrupt to perform in a reasonable period of time. Where the amount ordered was unrealistic and the bankrupt’s discharge is conditional on making additional payments, the appeal court did hold that results in an error of law and the appellate judge can either substitute the conditions or refer the matter back to the registrar for reconsideration.

The judge’s decision on the appeal from the registrar’s bankruptcy discharge order

The judge dismissed the appeal finding there were no overriding errors made by the registrar. With respect to the amount of $7,500 ordered as a condition of discharge from bankruptcy, the judge found as follows:

Ms. Johnson says that the registrar did not consider Mr. Hanlon’s untapped earning capacity and instead concentrated practically completely on her arguments of his potential inheritance. She suggests that Mr. Hanlon could be earning more than he is. In her opinion, he could earn more to enable him to make a settlement of $50,000 rather than the $7,500 that was ordered.

Mr. Hanlon’s real historic earnings offered adequate assistance for the registrar’s verdict that he was incapable of paying any more than the $7,500 that she ordered for him, did not have the financial prospects himself to do so and without getting personal loans from family members to help him with that. That was properly decided by the registrar based on the evidence before her.

The judge found that there is no merit in this or any other of the grounds of appeal. He found no error in the registrar’s decision, and having found the discharge condition that she imposed to have been reasonable in the circumstances, he dismissed the appeal.

Bankruptcy discharge summary

I hope that you found this bankruptcy discharge Brandon Blog interesting and that you now have a good appreciation for the process at the end of the administration for a person who files for bankruptcy and the considerations of the court if someone appeals a bankruptcy discharge order. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.bankruptcy discharge

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

LICENSED INSOLVENCY TRUSTEES: CAN MY BASIC BANKRUPTCY DISCHARGE BE REVERSED?

licensed insolvency trusteesIf you would prefer to listen to an audio version of this licensed insolvency trustees Brandon’s Blog, please scroll to the bottom and click on the podcast.

Licensed insolvency trustees introduction

From time to time I am asked an interesting question about licensed insolvency trustees and the bankruptcy process. The question is, can a bankruptcy discharge be reversed? The simple answer is, yes.

Most people then wonder how this could be possible. In order to understand how we should have a discussion of the bankruptcy discharge process. The best way is through a recent Court case I recently read.

Licensed insolvency trustees: The discharge process

It is the discharge when the person’s debts are erased. The debts are not “discharged” until that time. In order to get a discharge, the bankrupt has to live up to all of his or her duties.

The duties of a bankrupt include:

  • make disclosure of and deliver possession of all his or her assets (other than for certain provincial exemptions) that is under his or her possession or control to the licensed insolvency trustee (Trustee) or to anyone the Trustee so directs;
  • in such scenarios as are defined by the Office of the Superintendent of Bankruptcy, provide to the Trustee, for termination, all credit cards;
  • supply to the Trustee all documents or files relating to the property of the person who has filed for bankruptcy;
  • make full disclosure of all assets and liabilities to the Trustee by completing the sworn statement of affairs within 5 days of the date of bankruptcy;
  • assist the Trustee in making an inventory of all property; make full disclosure to the Trustee concerning all property sold or otherwise transferred within 1 year prior to the date of bankruptcy;
  • disclose any property sold or transferred at undervalue within 5 years prior to the date of filing;
  • attend the first meeting of creditors if held;
  • disclose current income and expense and continue monthly disclosure until discharged in order for the Trustee to calculate any surplus income requirement;
  • if there is surplus income, to make all such payments to the Trustee in full; and
  • to perform any other acts required by the Trustee or the Court, including, fulfilling any conditions of discharge issued by the Court.

Failure to perform any of the duties laid out in the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA), will result in the Trustee, and perhaps one or more creditors, opposing the bankrupt’s discharge. When there is an opposition, the Trustee will schedule a Court hearing date.

At the Court hearing, the Court can issue an absolute order of discharge, provide a discharge but with conditions to be fulfilled or even suspend the bankrupt’s discharge. Sometimes, there may be both a condition and a suspension, depending on the circumstances. In rare and bad circumstances, the Court could even refuse to hear the bankrupt’s application for discharge. Licensed insolvency trustees are expected to assist the Court by making a recommendation.llicensed insolvency trustees

Mark Daniel MacFarlane bankruptcy

Section 180 (1) and (2) of the BIA states:

“Court may annul discharge

180 (1) Where a bankrupt after his discharge fails to perform the duties imposed on him by this Act, the court may, on the application, annul his discharge.

Annulment of discharge obtained by fraud

(2) Where it appears to the court that the discharge of a bankrupt was obtained by fraud, the court may, on the application, annul his discharge.”

On June 24, 2019, the Supreme Court of Nova Scotia In Bankruptcy and Insolvency released its decision in the bankruptcy case of Mark Daniel MacFarlane (Citation: MacFarlane (Re), 2019 NSSC 201).

This case is not complex. However, it does clearly shows that the answer to the question, “can a bankruptcy discharge be reversed?” is clearly yes.

Mr. MacFarlane had a surplus income obligation to pay to the Trustee for the benefit of his creditors the amount of $3,823.05. At the time he was entitled to a discharge, he still owed the Trustee the amount of $2,879.05. In every personal bankruptcy, licensed insolvency trustees must do the surplus income calculation. If it turns out that the bankruptcy is required to contribute to his or her bankruptcy estate through surplus income payments, licensed insolvency trustees must report to the Court if the bankrupt made all the required payments.

The bankrupt also owned at the date of bankruptcy, an automobile that the Trustee estimated had a forced liquidation value of $17,500. The Trustee had disallowed the claim of a creditor claiming security over the vehicle. That creditor did not appeal the Trustee’s decision.

So, equity in the vehicle was available. In such cases, licensed insolvency trustees must obtain that value. For some reason that the Trustee could not fully explain, he agreed to sell the vehicle to Mr. MacFarlane for $15,702.50 plus HST. The Trustee did not sell it for all cash, but rather, entered into a conditional sale agreement with the bankrupt. In other words, the Trustee gave him financing.

Mr. MacFarlane paid made various payments totalling $7,040.00, both before and after his discharge, leaving a balance of $8,662.50.

Mark Daniel MacFarlane discharge

Although now stated explicitly in the Court decision, it appears that when it came time for Mr. MacFarlane’s application for discharge, the Trustee opposed it. On June 1, 2018, the Trustee applied for his discharge.

For some unexplained reason, the Trustee decided to not collect the balance of the surplus income requirement. The Trustee asked the Court for his outright discharge. The Court gave Mr. MacFarlane his absolute discharge.

So now the bankrupt is discharged, but he still owed the outstanding money for the vehicle that was sold to him by the Trustee under a conditional sale agreement. Rather than paying off the amount owing, Mr. MacFarlane sold the vehicle out of province and pocketed the cash.llicensed insolvency trustees

Licensed insolvency trustees can apply to Court to have a discharge reversed

So now the Trustee makes an application to Court to have Mr. MacFarlane’s discharge reversed. Officially, it is called having the discharge annulled. An annulment makes it as if the discharge never happened. So, if the Trustee is successful, Mr. MacFarlane will be back in bankruptcy. The Trustee also asked that the Court order the payment of the balance of what is owing on the vehicle, for a suspension of the discharge and an amount for costs and disbursements. Mr. MacFarlane represented himself in Court.

The Court was not overly impressed with either Mr. MacFarlane or the Trustee. The Court felt that not did he fail to carry out his responsibilities under the BIA, he actually acted in such a way to deny himself the advantage of any type of latitude the Court might have given him relative to those obligations.

The Court went on to say that his responsibilities under the BIA are not pointers or activities to be carried out when convenient or if life does not get in the way. It was obviously not his place to choose what he would and would not do. Concerning the automobile, it was not his to just sell it, pocket the cash, and tell the Trustee (and by extension his creditors) to go take a hike.

The Court was not too happy with the Trustee

The Court was at a loss to some of the Trustee’s behaviour also. There was no explanation given as to why the Trustee merely gave up on collecting all of the surplus income requirement. Likewise, there was no explanation why the Trustee would have given the bankrupt a discount off of the liquidation value of the vehicle. Such a look is not good for licensed insolvency trustees.

Quite rightly, the Court pointed out that in such situation, licensed insolvency trustees, and specifically this Trustee, should not have recommended to the Court that Mr. MacFarlane receive an absolute order of discharge. Rather, the Trustee should have insisted on a conditional order of discharge. The conditions would have been that the bankrupt pay off both the surplus income balance and the amount owing on the vehicle before being entitled to an absolute order of discharge.llicensed insolvency trustees

The Court’s decision

The Court ordered that:

  1. Mr. MacFarlane’s discharge from bankruptcy be annulled, so now he is once again an undischarged bankrupt.
  2. He must pay the Trustee the $8,662.50 owing on the vehicle.
  3. The Trustee will collect $500 for disbursements in tracing what happened to the vehicle from Mr. MacFarlane also.
  4. There will not be an automatic discharge once he pays the $9,162.50 to the Trustee. Rather, the bankrupt will have to apply to the Court for his discharge and there will be another discharge hearing.
  5. Since the Court was not asked to revisit the balance owing on surplus income, the Court didn’t review that again.
  6. The request of the Trustee for $5,000 as a censure of the bankrupt’s behaviour was denied. The Court said that this situation was caused in part by the Trustee allowing the surplus income requirement to be waived and agreeing to an absolute discharge.

Although not part of the Order, the Court strongly stated that any costs in the additional work done by the Trustee now, and the disposition of the amount to be received once finally paid, will be reviewed by the Court.

The Court emphatically intimated that since the Trustee’s actions were in part to blame for this situation, the Court was going to make sure that part of the $9,162.50 will go to the creditors when the Trustee comes back to Court to have its accounts taxed.

Licensed insolvency trustees conclusion

So there you have it on licensed insolvency trustees. Can a bankruptcy discharge be reversed or revoked? As we see in this case if the discharge was improperly obtained because the bankrupt did not fulfill all of his or her duties, YES. Similarly, if it can be shown that a discharge was obtained through fraud or fraudulent conduct, the discharge can be annulled in that case also.

Whenever I sit down with a person to talk about his or her insolvency, or with an owner of a company to discuss business financial problems, I make sure that we have an entire discussion. I not only talk to them about what process I recommend for their unique situation, but I also walk them through the entire process and what all the rights and responsibilities are. For personal insolvency, this includes the discharge process.

Are you or your business experiencing money troubles? Are you on the verge of bankruptcy? Do not wait till it is far too late to understand how you can restructure your financial affairs and avoid bankruptcy. You do not need to be one more person or company declaring bankruptcy in Canada.

As licensed insolvency trustees, we are the only specialists certified, accredited and overseen by the federal government to provide insolvency guidance and to apply remedies under the BIA. We will certainly help you to choose what is best for you to release you from your debt problems.

Call the Ira Smith Team today so we can get rid you of the stress, anxiety, pain and discomfort that your money issues have created. With the distinct roadmap, we establish simply for you, we will without delay return you right into a healthy and balanced problem-free life, Starting Over Staring Now. Call the Ira Smith Team today.

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ONTARIO BANKRUPTCY DISCHARGE CERTIFICATE: CANADIAN BANKRUPTCY LAW

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Ontario bankruptcy discharge certificate: Introduction

I have written before on the more practical aspects of Ontario bankruptcy discharge certificate issues and process within Canadian bankruptcy and insolvency law. The most recent blogs are:

  1. BANKRUPTCY DISCHARGE: THE TOP 8 THINGS THE BANKRUPTCY COURT WILL CONSIDER ON ANYONE’S BANKRUPTCY DISCHARGE APPLICATION – September 13, 2017
  2. GAMBLING DEBT BANKRUPTCY: CAN GAMBLING DEBT BE DISCHARGED IN BANKRUPTCY? – January 31, 2018

I recently reviewed the Ontario Court of Appeal decision in Cole v. RBC Dominion Securities Inc., 2017 ONCA 1009. This case is very interesting as it highlights an issue that we often don’t talk enough about when advising a person on what they might expect at their hearing under Canadian bankruptcy and insolvency law.

The facts

Henry Cole, age 52, had a Bankruptcy Order made against him in 2011 upon motion by Royal Bank of Canada (“RBC”), after he misappropriated $5 million from clients while working as their investment advisor. While in bankruptcy, he had a net monthly income of $14,600, resulting in surplus monthly income of $12,500. He nevertheless failed to make any surplus income payments.

To understand what surplus income in a bankruptcy is, see my June 1, 2016 vlog titled WHY SURPLUS INCOME IS SO POPULAR UNTIL YOU ARE FORCED INTO BANKRUPTCY.

The Ontario Court of Appeal (“ONCA”) upheld the two lower Court decisions

As is the case in bankruptcy matters, Mr. Cole’s bankruptcy discharge hearing came before the Master in Bankruptcy Court who also sits as the registrar in bankruptcy. Mr. Cole appealed the Master’s decision (discussed below) unsuccessfully to a Judge of the Bankruptcy Court. The Judge dismissed Mr. Cole’s appeal, thereby upholding the Master’s decision. As indicated above, the ONCA agreed with the Judge (and the Master) in dismissing Mr. Cole’s appeal.

Now for the interesting stuff!

Now for the interesting stuff. The Master determined that there was enough evidence to show that Mr. Cole, as a bankrupt, committed various bankruptcy offenses. The Master determined facts for which discharge may be refused, suspended or granted conditionally, under Section 173(1) of the Canadian bankruptcy and insolvency law called the Bankruptcy and Insolvency Act (Canada) (“BIA”).

The Master determined that Mr. Cole had failed to provide information to enable the Licensed Insolvency Trustee to calculate surplus income. Mr. Cole also conceded to the following facts:

  1. his assets upon bankruptcy were not of a value equal to fifty cents on the dollar on the amount of his unsecured liabilities. Mr. Cole gave no evidence why he should not be held responsible;
  2. he failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet his liabilities; and
  3. he brought on, or contributed to, his bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of his business affairs

With these findings, the Master, under Section 172(2) of the BIA, had to not grant an absolute discharge and to:

  1. refuse the discharge of a bankrupt;
  2. suspend the discharge for such period as the court thinks proper; or
  3. make the bankrupt, as a condition of his discharge, to do such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.

I must point out that the options available to the Master are not mutually exclusive. So, just like in Mr. Cole’s case, you could have the Court come up with a mixture of a suspension and a condition to pay moneys.

What the Master decided

The Master made several decisions. First, the Master dealt with the surplus income issue. The Master ordered Mr. Cole to pay $284,346 to the Trustee as surplus income, payable at a rate of $5,000 per month.

The Master also considered Mr. Cole’s criminal behaviour and that he had real income while not working any longer as an investment advisor. Given the amount of Mr. Cole’s liabilities, and for the integrity of the Canadian bankruptcy system, the Master ordered as further conditions that:

  1. Mr. Cole pay an extra $5,000 per month to the Trustee for a further six years for a total more payment of $360,000; and that
  2. his discharge from bankruptcy be suspended for two years.

The dismissed appeals

Mr. Cole argued before first the Judge, and then the ONCA, primarily that the Master’s treatment of surplus and other income was in error. He also argued that the Judge’s finding in dismissing his appeal was an error. The ONCA disagreed and dismissed his appeal.

ontario bankruptcy

So what is the lesson to be learned?

It is important for the Trustee, when sitting down with the person contemplating an insolvency proceeding, to understand all the facts. By properly understanding all the facts, we can provide proper professional advice and guidance.

Someone who had a facts situation like Mr. Cole, we would have strongly advised him or her to avoid bankruptcy and to contemplate performing a Division I Proposal to compromise his debts. The reasons we would have advised this are:

  1. the debtor has real income to successfully do a Proposal;
  2. Mr. Cole never would have qualified for an absolute discharge from bankruptcy given his facts situation and any discharge conditions would be onerous;
  3. avoiding the ongoing calculation of surplus income up to the time of his bankruptcy discharge hearing; and
  4. with the support of his major creditors, it is possible that the Proposal amount could have been somewhat less than $644,000 (subject to knowing the value of his assets at the date of bankruptcy).

he person needs our advice in plain English before making any decisions

We also would have advised the debtor the type of the rough ride they were in for if they chose to go ahead with the bankruptcy option. We would have explained in detail how we believed the Canadian bankruptcy and insolvency law system would treat him, so at least there would be no surprises during the bankruptcy administration.

Many times people we speak with do not like to hear the truth, and begin “Trustee shopping” until they find a Trustee that does not tell them all the bad news up front. People like this believe that if they aren’t told it, it can’t happen. This is a mistake. We believe everyone deserves to know the truth about their situation, to help them make the best decision possible.

In Mr. Cole’s case, not only did he find out the hard truth from the Court, he then spent money on his lawyers appealing the Master’s and Judge’s decisions. That obviously was extra money spent with no benefit received.

FULL DISCLOSURE: Our firm has never met with Mr. Cole and was not considered to be his Trustee.

What to do if you have too much debt

Declaring personal bаnkruрtсу in Canada is a big deal. So is getting your Ontario bankruptcy discharge certificate. While it can be a way out for the honest but unfortunate debtor who is deep in debt and looking for a new start, there are rules, rеѕtrісtіоnѕ and fіnаnсіаl rаmіfісаtіоnѕ.

That is why the Ira Smith Team always looks first to see if one of the bankruptcy alternatives would be a better fit for you. The alternatives we look at with you include:

The Ira Smith Team has 50+ years of cumulative experience dealing with issues just like the ones that you’re facing. Give us a call today and let us give you back peace of mind Starting Over, Starting Now.

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BANKRUPTCY DISCHARGE: MY CHEAT-SHEET OF THE TOP 8 THINGS THE BANKRUPTCY COURT CONSIDERS

Bankruptcy discharge introduction

A bankruptcy discharge is when the bankrupt is released under Canadian bankruptcy law from his or her debts as part of the bankruptcy process. Some people think that it is the act of filing bankruptcy that releases the bankrupt from liability. This is not the case. It is the discharge from bankruptcy process that “discharges” the bankrupt’s debts.

We explain in this vlog the procedure when a bankrupt’s outright discharge is opposed. We discuss the top 8 things that the Bankruptcy Court will consider in determining just what outcome the bankrupt could expect.

The primary benefit of the bankruptcy process for the insolvent person

The bankruptcy discharge is among the primary benefits of relief under the Bankruptcy and Insolvency Act (Canada) (BIA). The discharge is vital to the bankruptcy process. Debtors, after bankruptcy, can wipe the slate clean and start over, which is a central principle under the BIA statute.

Not all debts may be released

A bankruptcy discharge offers the discharge of many unsecured debts. Credit card debts, personal income tax debt, unsecured personal loans and under certain conditions, some student loan debt are all dischargeable debts. Financial debts, which will not be discharged include:

  • support payments to a previous spouse or to children;
  • fines or financial charges imposed by the Court;
  • debts emerging from fraudulent behaviour;
  • student loans if fewer than seven years have passed considering that the bankrupt quit being a full or part-time student.

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    bankruptcy discharge

It can be opposed

An insolvent’s bankruptcy discharge application may be opposed by one or more unsecured creditors or the Licensed Insolvency Trustee (formerly called a bankruptcy trustee) (LIT). A creditor opposition is created when the creditor files the required notice of opposition, setting out the reasons for opposing.

This happens if the insolvent has not met all of his/her responsibilities under the BIA. Making full disclosure, attending the required two financial counselling sessions and making all necessary surplus income payments are all duties of the bankrupt that must be fulfilled if a discharge is to be considered.

It can also happen if the individual bankrupt has actually committed a bankruptcy offence. Those are acts listed in section 173 (1) of the BIA. In this case, there needs to be a bankruptcy discharge hearing in Court and the Court will after that evaluate the LIT or creditor opposition as well as give its decision on the discharge from personal bankruptcy.

There are four types of discharges possible

There are 4 types of discharges:

  1. Absolute discharge— The bankrupt is launched from the legal obligation to pay off financial obligations that existed on the day of bankruptcy, except for certain types of debt identified above.
  1. Conditional discharge— The bankrupt must fulfill certain conditions, additional payments into the bankruptcy estate, to get an absolute discharge. Once all conditions have been fulfilled, an absolute discharge will certainly be granted.
  1. Suspended discharge— An absolute discharge that will be granted at later on a specific date determined by the Court.
  1. Refused discharge— The Court has the right to decline a discharge.

If there is no opposition to the discharge from bankruptcy of the bankrupt by a creditor or the LIT, then the LIT is able to provide an automatic discharge by issuing the appropriate certificate. There is no need for attendance in Court.

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bankruptcy discharge

The opposition process

When a debtor’s bankruptcy discharge application is opposed by either an unsecured creditor or the LIT, the Trustee needs to secure a Court day. This will be for a Court hearing on the insolvent’s application for discharge. The LIT must then tell all creditors who have filed a proof of claim of the opposition. Details are also provided about the date, time as well as place of the Court hearing.

The Trustee needs to also file a report with the Court on the conduct of the bankrupt both prior to as well as after applying for bankruptcy. The report will as well give a summary of the financial results of the bankruptcy administration. If a creditor has opposed the bankrupt’s discharge, then that creditor likewise needed to send a notice of opposition.

Does the bankrupt need a lawyer on an opposed discharge?

When going to Court for his/her discharge application hearing, a bankrupt would be well advised to come with a skilled bankruptcy lawyer to represent his or her interests. Sometimes the discharge hearing is less formal than various other types of Court hearings.

However, the Court follows all the proper regulations of civil procedure. It is sometimes tough for nonprofessionals to put their best foot forward without an attorney’s aid.

There have been many Court cases on applications for discharge. A Court decision released recently from the Queen’s Bench of Saskatchewan supplies an exceptional walk-through of the points the Court will take into consideration. For those interested, the reference is Hertz Bankruptcy (Re), 2017 SKQB 224 (CanLII).

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bankruptcy discharge

The top 8 things the Bankruptcy Court will consider

The concerns the Court thought about, in determining what type of bankruptcy discharge certificate to issue, which is the same in all bankruptcy discharge hearings, were:

  1. Do the conditions of the bankruptcy filing and the bankrupt’s conduct sustain an order discharging the Bankrupt’s unsecured debts?
  2. The Court’s problem is to make sure that within a choice the policy purposes of the BIA are fulfilled. The bankruptcy, including the insolvent’s discharge, should act as a deterrence for the person not to duplicate the very same behaviour.
  3. If the circumstances of the bankruptcy support an order discharging the bankrupt, what terms of discharge are proper under the distinct circumstances of the bankruptcy?
  4. What were the conditions of the insolvent when the debts were sustained?
  5. What efforts did the insolvent make to pay the creditors?
  6. Did the bankrupt pay in respect of certain other debts but not all of them and particularly not the debt of the opposing creditor?
  7. Exactly what are the insolvent’s monetary opportunities for the future?
  8. Is there any other conduct or reality that needs to be factored into with the regard to discharge?

The Court will take lots of variables into account. The conduct, previous income, education and age of the bankrupt are all important factors. The Court will certainly likewise trust the Trustee’s report to Court on the bankrupt’s application for discharge. The Trustee’s report assists in determining facts about the conduct of the insolvent and his or her future prospects.

bankruptcy discharge

Is the bankrupt young or old?

Prevention is always a consideration. It is however very important to remember that Courts tend to be extra conventional when dealing with older bankrupts. A more youthful bankrupt with years of income-making opportunities could be needed to make an extra significant repayment. Less respect is given to the instant ability to pay.

An older bankrupt with some surplus income but fewer working years might be needed to pay less surplus income obligations into the bankruptcy estate.

Bankruptcy discharge: Is my bankruptcy case over when I get a discharge?

You should by this point in my Brandon Blog realize that when you receive an absolute discharge from your bankruptcy, at that point, you are discharged from your unsecured debts.

A discharge shows that you have finished with your bankruptcy legal process and your personal liability for unsecured debts has ceased. It’s not a separate thing from bankruptcy; it happens either automatically or by an Order of the Court, as I have described above.

At that point, the LIT still has some duties to fulfill. They include:

  • if there is going to be a dividend paid to the creditors, making sure that all proofs of claim have been reviewed and allowed for dividend purposes;
  • resolve any uncertainties the LIT may have concerning certain filed bankruptcy claims, including the issuance of Notices of Disallowance if any;
  • preparing the bankruptcy administration Final Statement of Receipts and Disbursements;
  • getting approval from the Office of the Superintendent of Bankruptcy to the Final Statement
  • getting the Final Statement, including the LIT’s fee and disbursements, approved by the Court;
  • issuing the dividend bankruptcy payments, if any
  • getting the discharge of the LIT

It is then that your bankruptcy case is closed.

Bankruptcy discharge: Do you have too much debt and want to avoid bankruptcy?

Do you have too many debt obligations and debt payments and have no idea how to deal with them? Act before you find yourself in the throes of an emergency financial situation. Ira Smith Trustee & Receiver Inc. has assisted many Canadian businesses and people throughout the Greater Toronto Area (GTA) in dealing with debts that need a plan for Starting Over, Starting Now. Don’t postpone. Give us a call today. Financial problems can be solved while avoiding bankruptcy with timely activity as well as our excellent strategy tailored just for you.

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