Your Path to Debt Freedom
Bankruptcies come in many shapes and sizes, and each unique case brings something different to our understanding of how Canadian bankruptcy laws work. Bankruptcy court can be a standard occurrence or an opportunity to challenge the system and push for necessary reforms.
You likely didn’t click on this article to learn about challenging the bankruptcy system, you want to know that if you were to file personal bankruptcy – you wouldn’t have to go to court. We can promise you that you have very little to be concerned about, bankruptcy court is the exception for most bankrupts, not the norm.
What Is Bankruptcy Court?
In Canada we have a separate court system for addressing bankruptcy issues. If you are currently bankrupt and know that a court hearing will be held to apply for your bankruptcy discharge, you can rest assured that you won’t be bumping into any criminals at your hearing.
Most bankruptcy courts will schedule similar hearings on the same day. If you are in court because a creditor has opposed your discharge, other opposition hearings may be scheduled too. If you are attending because your Trustee is seeking an absolute order of discharge for you, there will likely be other bankrupts in court for the same reason on the same day.
Bankruptcy court is presided over by a specialized bankruptcy judge who is well-versed in the Canadian Bankruptcy and Insolvency Act. Your Licensed Insolvency Trustee will attend the hearing with you and you won’t have to face the court alone.
Does Every Bankruptcy Go To Court?
Not all bankruptcies end with a court hearing. In fact, the majority of bankruptcies do not see the inside of a courtroom. Most bankruptcies end with what is called an automatic discharge, a final document is issued confirming all debt included in the bankruptcy is officially “discharged” and must be written off by your creditors.
To obtain an automatic discharge a bankrupt must complete a set of duties to the satisfaction of the trustee. In this regard your trustee is an officer of the court who is responsible for ensuring every duty in the act is complete before issuing an automatic discharge. Your trustee must oppose your discharge if he or she cannot justify to the court that all duties have been completed during the initial bankruptcy period. Here are the general duties required of a bankrupt person:
- Make all required payments to the estate
- Attend two mandatory counseling sessions
- Submit monthly income and expense reports, with paystubs and receipts for specific expenses
- Report all assets to the trustee and provide any/all requested documentation to help value them
- Stay in contact with your trustee and keep your contact information up to date
- Provide information required to file your pre-bankruptcy and post-bankruptcy tax returns
Other Reasons For A Court Hearing
Not completing duties during the first 9 months of bankruptcy is a common reason for a hearing. Some bankruptcies go to court because a creditor chooses to oppose their discharge. Some may have been bankrupt more than twice in the past.
Any creditor can oppose a bankruptcy discharge if they have reasonable grounds and take on the legal expense. Here are a few common reasons that creditors may oppose your bankruptcy discharge:
- High tax debt to Canada Revenue Agency. If you owe more than $200,000 and this represents at least 75% of your debt, CRA may request court.
- Professional Student Loans. If you have borrowed money for professional studies such as to attend law school or medical school, some banks may choose to oppose.
- Proof of fraudulent activity: when fraud is a concern for a creditor they may choose to ask the court to allow their debt to stand outside of your bankruptcy, making their debt remain collectible even after your discharge.
Even if you think court may be a possibility in your bankruptcy and need debt help please call 310-4321. A Spergel expert can review your circumstances and determine if there will be a risk of a bankruptcy court hearing. An alternative solution such as a consumer proposal may be a better. If not, we will help you through your bankruptcy and any court hearing(s) you may face. You owe it to yourself to become debt free, whatever it takes.