Toronto Bankruptcy Court – When is Attendance Necessary?

Generally speaking, someone who files bankruptcy for the first or second time will get what is called an automatic discharge from bankruptcy. Years ago (pre-1992), someone that filed bankruptcy had […]

Generally speaking, someone who files bankruptcy for the first or second time will get what is called an automatic discharge from bankruptcy.

Years ago (pre-1992), someone that filed bankruptcy had to attend bankruptcy court to obtain her discharge from bankruptcy. She had to demonstrate to the court that she fulfilled certain obligations, such as attending debt counselling and generally cooperating with the trustee. If the court was satisfied, the debtor was granted an Absolute Discharge from bankruptcy (i.e., her debts were discharged and she was debt-free).

Subsequent amendments to the Bankruptcy and Insolvency Act now allow a debtor to be discharged automatically  if she is a first or second-time bankrupt. An “automatic” discharge means that after performing certain obligations, the debtor gets her discharge without having to attend bankruptcy court. The trustee issues to her a legal document called a “Certificate of Discharge “.

So under what circumstances would a first or second time bankruptcy be required to attend bankruptcy court? Here are some common examples:

  • the debtor fails to attend debt counselling;
  • the debtor brought the bankruptcy by rash and hazardous speculations or gambling;
  • the debtor has been guilty of any fraud or fraudulent breach of trust;
  • the debtor has failed to comply with a requirement to pay surplus income obligations;
  • the debtor, if she could have made a viable proposal, chose bankruptcy rather than a proposal to creditors;
  • the debtor has failed to perform the duties imposed on the bankrupt under this Act or to comply with any order of the court; and
  • the debtor has $200,000 or more of personal income tax debt and whose personal income tax debt represents 75% or more of her total unsecured proven claims.

If a first or second-time bankrupt has complied with all her obligations and has acted honestly before and during her bankruptcy proceedings, she will get an automatic discharge from bankruptcy.

This post should not be interpreted as legal advice or a legal opinion. Please consult your Fong and Partners Inc. advisor to review your own particular circumstances.

© Copyright Fong and Partners Inc 2010.

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