Understanding Bankruptcy Discharge
An automatic bankruptcy discharge, a prevalent form of discharge, frees a debtor from their bankruptcy-included debts without necessitating a court hearing. This occurs when the debtor fulfills specific criteria, such as being a first-time bankrupt and completing all bankruptcy duties.
A first-time bankrupt debtor obligated to contribute a portion of their income into the bankruptcy estate will qualify for an automatic discharge after making contributions for 21 months, assuming they fulfill all other bankruptcy obligations. On the other hand, a second-time bankrupt who is not obligated to contribute a portion of their income will be eligible for automatic discharge 24 months after the date of the bankruptcy, provided they have attended two financial counselling sessions and no objections have been raised.
Keep in mind not all individuals will qualify for an automatic discharge. For example, if the debtor has surplus income, the discharge period can extend to 21 months for a first-time bankrupt and up to 36 months for a second-time bankrupt. Additionally, the discharge period can be extended due to objections from creditors or trustees.
Time Period for Discharge
The timeframe for a debtor to qualify for an automatic discharge can fluctuate significantly owing to various factors. For a first-time bankrupt, the standard period is nine months, assuming all bankruptcy duties have been fulfilled. However, surplus income can extend this period to 21 months.
Additionally, filing for bankruptcy or a Consumer Proposal multiple times can prolong the period. Other factors that could extend the discharge period for bankruptcy include objections from creditors or trustees.
Impact of Surplus Income
Surplus income is the amount a debtor earns above a particular threshold established by the government. This threshold is determined based on the debtor’s household size and is calculated post-tax. Any income exceeding this threshold may result in surplus income payments.
Surplus income can significantly influence the duration of the bankruptcy process and the achievement of discharge. For first-time bankrupts, the standard nine-month period can extend to 21 months. For individuals with prior bankruptcies, the duration can increase from 24 to 36 months. Also, remember that surplus income can extend the bankruptcy duration from the minimum period to possibly twice that period, contingent on whether it’s a first-time or subsequent bankruptcy.