Discharge of a bankrupt

A discharge is how an individual’s bankruptcy ends. You meet it when a sole proprietor who sold or lost a business has been bankrupt, or when you assess someone who has. See how to buy assets from an insolvent company.

Kinds of discharge

The Office of the Superintendent of Bankruptcy lists absolute, conditional, suspended and automatic discharges. A conditional discharge is one where the court imposes conditions that must be met before it becomes absolute. Section 168.1(1) of the BIA, subject to subsection (2) and section 157.1(3), sets automatic discharge for an individual bankrupt who has been bankrupt no more than once before, other than one referred to in section 172.1(1). Its timing depends on any earlier bankruptcy, on any opposition to the discharge, and on whether the bankrupt has been required to make payments under section 68. Under section 168.1(2), the bankrupt may instead apply to the court for a discharge sooner. Section 168.1(5) deems an automatic discharge to be an absolute and immediate order of discharge.

What survives

Under section 178(1), an order of discharge does not release the bankrupt from, among other things, a fine, penalty or restitution order imposed by a court for an offence, and certain debts or liabilities for alimony, alimentary pension or support. Debts arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity are also listed there. Subject to section 178(1), section 178(2) says an order of discharge releases the bankrupt from all claims provable in bankruptcy. Check the whole section and the discharge certificate; see trustee in bankruptcy.