Bankruptcy can seem like an intimidating process, but it does not need to be. At Spergel, our experienced Licensed Insolvency Trustees have been helping Canadians to file bankruptcy for over thirty years, and we are here to help you too. Bankruptcy is the process of assigning any non exempt assets you may have over to your Licensed Insolvency Trustee in exchange for clearance of your unsecured debts. Your assets are then sold, with any proceeds going towards the repayment of your creditors. Provided you meet your bankruptcy duties, the goal is to become discharged from bankruptcy so that you are free to enjoy life after bankruptcy. Sometimes, however, the situation is not so straightforward. You may be given a conditional discharge, which is where the Court give you some criteria to hit before being discharged. Examples of this conditional criteria include making set payments over a period of time. Once you meet the conditions associated with your bankruptcy and the Court has approved, you can receive your absolute discharge. In this article, we share all you need to know about conditional discharge in bankruptcy.
What is a conditional discharge in bankruptcy?
When it comes to the final step of ending your status as a bankrupt, the goal is to be discharged. Once you get to the point of discharge in your bankruptcy, you are no longer liable to making payments on your unsecured debts. There are two types of discharge from bankruptcy – an absolute discharge and a conditional discharge. In an absolute discharge, a bankrupt individual can walk free without needing to make any further payments on their debts. In a conditional discharge, however, there are additional steps required by the Court. These conditions are specific to the individual before they can reach absolute discharge. The most common kind of condition for getting discharged is being ordered to repay an amount of money back to a creditor over a fixed time period.
What causes a conditional discharge?
Conditional discharges are often due to a creditor, a Licensed Insolvency Trustee, or the Office of the Superintended of Bankruptcy being opposed to an absolute discharge. It is relatively rare. This is most often due to the individual who filed bankruptcy failing to meet one of more of their bankruptcy duties. Typical breaches of bankruptcy duties leading to a conditional discharge include the following:
- Failing to disclose all assets to your Licensed Insolvency Trustee
- Failing to deliver all non-exempt assets to your Licensed Insolvency Trustee
- Failing to share all RRSP statements and tax returns with your Licensed Insolvency Trustee
- Failing to surrender all credit cards to your Licensed Insolvency Trustee to be cancelled
- Not attending two mandatory credit counselling sessions
- Failing to report household income and expenses to your Licensed Insolvency Trustee and making the relevant payments
- Failing to attend a meeting of creditors or an examination by the Office of the Superintendent of Bankruptcy wherever necessary
- Failing to keep your Licensed Insolvency Trustee informed of your home address throughout the bankruptcy process
What is the difference between an absolute discharge and a conditional discharge of bankruptcy?
The ultimate goal in a bankruptcy is for both an absolute discharge and a conditional discharge to have the same result. This is that the individual who filed bankruptcy to become free from bankruptcy and to begin a fresh financial future. If you have filed bankruptcy, it is possible for you to gain an absolute discharge after 9 to 21 months provided you meet the eligibility criteria laid out above. It is also imperative that nobody objects to you receiving an absolute discharge. The primary difference between an absolute discharge and a conditional discharge from bankruptcy is that a conditional discharge delays the absolute discharge, and includes terms that must be met in order for the bankruptcy to be considered complete. While the end result of both types of bankruptcy discharge are the same, you will likely need to wait around an additional 9-12 months in a conditional discharge.
What happens if you do not get discharged from bankruptcy at all?
A conditional discharge is not the end of the world – you are likely to be discharged from your bankruptcy at some point. In some extreme cases, however, you can be refused discharge from a bankruptcy by the Courts altogether. This means that the bankrupt individual remains as a bankrupt and keeps the debts that they owed when they first filed. They will not be able to borrow any more than $1,000 without informing a creditor that they have filed bankruptcy. It is possible for a bankrupt to work with their Licensed Insolvency Trustee to address the duties they have not fulfilled in order to meet the requirements they have failed to deliver to date. Do note that you are not able to apply for a release until your Licensed Insolvency Trustee agrees it has happened. It is possible to have an undischarged bankruptcy annulled by filing a consumer proposal instead. To learn more about consumer proposals and how you can reduce your debts by up to 80%, book a free consultation with a Licensed Insolvency Trustee at Spergel.
Are there other types of discharge from bankruptcy?
Beyond absolute, conditional, and a refused discharge, there is one other type of bankruptcy discharge – a suspended discharge. This is an absolute discharge which is delayed until a specific later date. Contrary to a conditional discharge, a suspended discharge does not require further action from the bankruptcy individual – you simply need to wait for the specified time delay.
While it can seem demotivating to receive a conditional discharge after the bankruptcy process, you should not let it dishearten you. You receive another chance to complete your bankruptcy, as well as a refreshed timeline for gaining your fresh financial future. It is important to be careful in following the conditions and doing all you can to meet them. You want to avoid having a refused discharge instead, which can set you back considerably. You should work closely with an expert Licensed Insolvency Trustee and keep them updated on any challenges you face in meeting the terms of your conditional discharge.
If you have more questions on receiving a conditional discharge, and are unsure on your next steps, book a free consultation with Spergel. Our expert Licensed Insolvency Trustees have been helping Canadians to file bankruptcy for over thirty years, and have assisted with all kinds of outcome. Reach out today – you owe it to yourself.