Bankruptcy in Ontario exists, according to the law, to give the “honest but unfortunate” person a discharge, or release, from their debts so they can get a fresh start. But what happens if that fresh start is delayed?
A creditor cannot stop you from going bankrupt. However, as part of the bankruptcy process, a creditor can object to your obtaining a bankruptcy discharge and in effect delaying the completion of your bankruptcy.
Objecting to someone’s discharge is very rare. For most people who have never filed bankruptcy before, you are eligible to be automatically discharged after either 9 or 21 months, depending on whether or not you have to pay surplus income.
So imagine this; you have faithfully completed all of your duties, paid the necessary money and are anxiously awaiting word from your Trustee at Hoyes Michalos that you have been discharged. Then, a week before your scheduled discharge date, you receive a notice in the mail from Big Bank’s lawyer advising you that they are opposing your discharge.
Yikes, what do you do now?
Well, the first thing you will do is meet with your Hoyes Michalos Bankruptcy Trustee to determine a go forward plan and to try and figure out why Big Bank (or Big Credit Card Company, or whomever) opposed your discharge. A creditor opposition means you cannot be automatically discharged, even though you have done everything you were asked to do. So much for the fresh start!
If a creditor opposes your discharge, you are required to attend a discharge hearing in Bankruptcy Court, and the Bankruptcy Registrar (a judge) will decide on the terms of your discharge. The judge may decide that you are not required to do anything else, or they may decide that you are required to make additional payments, or fulfill other duties.
So now you are worried about going to court, which is a natural reaction.
When will you be going to Court? That depends on the Court’s schedule. It may be two months for now, or it may be six months or longer. Until the Court date you remain in bankruptcy and you have to continue to report your income to your trustee.
Once you find out the exact court date, you will meet with your Hoyes Michalos Trustee again, probably about two weeks prior to court, to discuss the court process. You may decide you want to hire a bankruptcy lawyer to represent you in court. You may decide to simply appear yourself.
Finally the Court day arrives and your nervously attend in Court. Big Bank’s lawyer explains why they are opposing your discharge. It may be because they think you have the ability to repay some of your debts or maybe they think there is missing information on your bankruptcy papers. You will then answer whatever questions they ask.
The Court will probably advise they will send their decision in writing. Great, another delay. How long will that be? Again, it’s up to the Court, but a written decision may take a few weeks.
So what could happen? You could get discharged without any money owing, or you may need to pay more money in order to get discharged, or complete other duties.
Is there anything you could have done to avoid this? Yes and no. In a bankruptcy, any creditor can oppose your discharge and they can do it up to the day before you are scheduled to be discharge. Unfortunately, there is no way to know for sure in advance what they will do.
There is only one guaranteed way to avoid a creditor opposition and a bankruptcy discharge hearing, and that is to not go bankrupt. If you have more debts than you can handle, and you want to avoid bankruptcy, a possible alternative is to file a consumer proposal, the number one alternative to bankruptcy. In a consumer proposal, you work with your Hoyes Michalos consumer proposal administrator to propose a fair settlement to your creditors. For example, if you owe $50,000, based on your ability to pay you might offer to pay $400 per month over the next 50 months, or $20,000 in total (actual numbers will vary based on your individual circumstances). If the creditors accept this deal, you simply make the payments as agreed, and you are done.
That’s a big advantage of a consumer proposal: you know exactly what you have to pay, you avoid bankruptcy, and you avoid a bankruptcy court discharge hearing or a creditor opposition, because you are not bankrupt!
When reviewing your options it’s important to review the likelihood your discharge will be opposed if you file for bankruptcy. If you think one of your creditors may object to your discharge, a consumer proposal may be your best alternative. Obviously creditor oppositions and bankruptcy discharge hearings are a complicated area of bankruptcy law. They don’t happen often, so you want a bankruptcy trustee that is experienced in dealing with creditors, and the court process. At Hoyes Michalos we have handled more than 20,000 consumer proposal and bankruptcy filings over the years, and we have appeared in court as trustees on hundreds of occasions, so we are very familiar with the court process. That’s why we take the time, at the start of the bankruptcy process, to explain how the process works, and to give you the information you need to make an informed decision.