Declaring bankruptcy isn’t as difficult as you might think!

I always tell clients that declaring bankruptcy is not so difficult – relief from hounding creditors and their agents is just a few signatures away. It’s a bit harder to secure an automatic discharge from your bankruptcy though – and that, for most, is the point of the exercise. Just as CRA has a mysterious selection process for choosing a few of us each year to be scrutinized more carefully, the Ontario Superintendent of Bankruptcy (OSB) does the same with personal bankruptcy filings.

Your case could end up in court for one of many reasons. Maybe the trustee herself decided to oppose your bankruptcy, either for technical reasons, or grounds of suspicion that something isn’t kosher about your application. (Mostly it’s technical in my experience)

Or maybe your bankruptcy was reviewed by the OSB, and they told the trustee to oppose your discharge. In this case, you will be scheduled for a court appearance before a Registrar, who will listen to the trustee and you, and make a decision as to when and if you should receive a discharge, and what cost will be attached to that. If the OSB reviewed your case, you would have first been invited to an examination hearing, typically four or five hours in length, and grilled on the circumstances leading up to you filing your bankruptcy. After this hearing, you must wait to be invited to court for your discharge hearing.

The court Registrar is all powerful, and can pretty much rule as they see fit. Recently it was announced the Registrars are all going to be replaced by Case Management Masters – a whole cadre of new individuals – same power, but perhaps less experience. Trustees are openly wondering how these changes will affect their clients and their business practice when next they go before the courts.

The court process is usually an open door affair, and can make for compelling viewing if you are ever downtown Toronto on University Avenue when court is in session. I have only gone occasionally though, as I prefer my clients avoid this process if at all possible. Even if the outcome of the court hearing is a full discharge, no one likes the waiting and the uncertainty in the months leading up to the court date.

I know of many stories that made their way to the courts – and they can make for interesting reading. In the months to come, I’ll publish some of the more intriguing ones.

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