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If you’ve had serious financial hardship in the past that prevented you from being able to repay your debts, you may have filed for personal bankruptcy. As a last resort to eliminate your debts, bankruptcy can get your creditors off your back and end the collection calls. It can also give you a clean slate and help you work toward building a better and healthier financial foundation.

But it’s important to understand that you won’t be considered “bankrupt” forever. At some point, you’ll be discharged from bankruptcy, at which point you’ll be exempted from your responsibility to repay your debt. 

Find out how and when you can get discharged from bankruptcy. 

What Is A Discharge From Bankruptcy Mean?

A bankruptcy discharge is the last step of bankruptcy. After you’ve fulfilled your bankruptcy obligations, your LIT will provide you with a certificate of discharge. Being discharged of bankruptcy essentially means that you are released from your responsibility to pay back any debts that you had when you originally filed for bankruptcy. 

However, it’s important to note that being discharged from bankruptcy does not mean you’re cleared of all debts and financial obligations. There are certain things you are not released from with bankruptcy, including:

  • Spousal or child support payments
  • Debts as a result of fraud
  • Student loans if less than seven years have passed since you ceased to be a student 

How Does A Discharge From Bankruptcy Work?

You must wait a certain amount of time before being discharged from bankruptcy. Certain factors will play a role in your bankruptcy discharge, including how many times you’ve filed, and/or if you earn any surplus income that would require additional payments. 

You’ll either be automatically discharged, or you’ll need to attend court and wait for a decision from the judge about how, if, or when you’ll be discharged. 

Automatic Discharges

As mentioned, your eligibility for an automatic discharge from bankruptcy is based on the number of times you’ve filed in the past.

First-Time Discharge From Bankruptcy

If this is your first time filing for bankruptcy, you’ll be automatically discharged after 9 months or 21 months, depending on whether you were required to pay surplus income:

  • If you did not earn any surplus income, you’ll be discharged after 9 months.
  • If you did earn surplus income, you’ll be discharged after 21 months, as long as you made your required payments.

Keep in mind that these time frames could change if someone opposes your discharge or if you did not attend your required meetings. 

Second-Time Discharge From Bankruptcy

If this is your second time filing for bankruptcy, you’ll be automatically discharged after either 24 or 36 months, depending on whether you were required to pay surplus income:

  • If you did not earn any surplus income, you’ll be discharged after 24 months.
  • If you did earn surplus income, you’ll be discharged after 36 months, as long as all conditions are met.

Third-Time Bankruptcies 

If you’ve filed for bankruptcy at least twice in the past, you’ll need to go to court to be discharged. The amount of time you’ll need to wait to be discharged will be determined by the court. 

Automatic Discharge PeriodNo Surplus PaymentsSurplus Payments
First-Time Bankruptcy9 months21 months
Second-Time Bankruptcy24 months36 months
Third-Time BankruptcyDetermined in courtDetermined in court

What Happens If You’re Not Automatically Discharged?

If you are not eligible for an automatic discharge, it will fall to the Bankruptcy Court who will make a decision. Depending on your circumstances, they may decide any of the following: 

  • An absolute discharge of debts included in the bankruptcy.
  • A conditional discharge, which requires that specific conditions must be met before a discharge is granted. Once these conditions are fulfilled, you’ll be granted an absolute discharge.
  • A suspended discharge, which means an absolute discharge does not take effect until a specific date in the future.
  • Refusal of bankruptcy discharge.

What Will You Recieve When You’re Discharged From Bankruptcy?

If you are automatically discharged – which is available to those who are filing for a first or second time – you’ll receive your Discharge Certificate confirming your discharge. Otherwise, you’ll need to have a court judge determine when you are discharged. Then you’ll be granted a Discharge Certificate.

It’s important to file your certificate safely, as you may want to use it at some point in the future when applying for a loan after the bankruptcy process is complete. In this case, you may need to give the lender proof of your bankruptcy discharge showing that you are no longer going through bankruptcy.

When Can You Be Discharged From Bankruptcy?

The time at which you’ll be discharged from bankruptcy depends on a few factors:

  • First-Time Bankruptcy – If you’ve filed for bankruptcy for the first time, the process takes at least 9 months to complete. You can be automatically discharged 9 months after filing for bankruptcy if you’ve met all the requirements including attending at least two financial counselling sessions.
  • Second Bankruptcy – If you’ve filed for bankruptcy more than once, you won’t be eligible for discharge after 9 months. Instead, you’ll only be able to fter at least 24 months following your bankruptcy filing. 

How Bankruptcy Surplus Income Can Affect Your Discharge

Your bankruptcy may be extended if you have “surplus income,” which is an income level established by the government. If your income exceeds this predetermined level, you’ll have to make additional payments to your trustee throughout your bankruptcy, which will extend your bankruptcy discharge date.

  • First Bankruptcy. If your income exceeds the income level established by the government, you’ll be required to make surplus income for 21 months before you’re eligible to be discharged from bankruptcy. 
  • Second Bankruptcy. Similarly, if your income exceeds the income level established by the government, you’ll be required to make surplus income for 36 months before you’re eligible to be discharged from bankruptcy. 

What Can Affect Your Eligibility To Be Discharged From Bankruptcy? 

Keep in mind, there could be other reasons why you may not be eligible for an automatic discharge from bankruptcy. If you failed to complete all of the tasks assigned to you during your bankruptcy, you could find yourself with an extended discharge date. Your trustee needs a number of things from you, such as your:

If you do not provide your trustee with any of these, you could be denied an automatic discharge.

Third-Time Filing For Bankruptcy

If you’ve filed for bankruptcy for the third time, you will have to go to court in order to be discharged from your bankruptcy.

Can A Creditor Protest Against Your Discharge?

While this does not occur very often, it still happens. If you receive a notice of opposition to discharge from one of your creditors, you may have to settle matters in court. For whatever reason, some creditors may have a problem with you being discharged from bankruptcy. This, in turn, can make it difficult for you to resolve the situation.

What Is A Trustee Discharge?

Once all tasks associated with the bankruptcy process have been completed, the Licensed Insolvency Trustee that was appointed to you when filing for bankruptcy will need to apply to be discharged. They will be required to file a formal report with the Office of the Superintendent of Bankruptcy (OSB) and the court.

Several items will be addressed in the report, including:

  • any fees associated with filing bankruptcy,
  • the trustee’s fees
  • how assets have been liquidated
  • how creditors have been repaid.

Once the court determines that the trustee has completed all duties under the Bankruptcy and Insolvency Act, the trustee will be discharged.  

What Happens If Your Bankruptcy Is Not Discharged?

The end goal of personal bankruptcy is to be discharged from it. Not being discharged from bankruptcy puts you in a vulnerable legal and financial situation. Until the discharge has been handled appropriately, all of your finances are essentially at a standstill. 

  • Access To Credit – For starters, your ability to take out a personal loan will be limited due to it affecting your credit. Without a formal bankruptcy discharge on file, you won’t be allowed to borrow without notifying the lender that you are bankrupt. 
  • If you attempt to take out a loan for more than that amount and fail to disclose your bankruptcy to the lender, you would be in violation of the law.

You could also find yourself scrambling – and paying – to find a new trustee if the one who was originally appointed applies for discharge. If you don’t complete the process and fail to get discharged, you may find yourself having to hire a new trustee, which will cost you more money and waste a lot of time.  

Once your trustee is discharged, your creditors may come back at you for the money you owe them on. Not only will they demand the original loan amount, they will likely charge you interest on monies owed. They may even choose to take you to court to get what is rightfully theirs.

Final Thoughts

Your discharge from bankruptcy is the last and most important step in the entire process of bankruptcy. While you’re protected from being pursued by creditors once you file for bankruptcy, they can still come after you for money until you’ve been formally discharged from bankruptcy. In order to officially be rid of all of your debts, discharge is crucial. You’d be well advised to fulfill all of your duties in order to ensure imminent bankruptcy discharge.

Undischarged Bankruptcy FAQs

What’s an undischarged bankruptcy?

An undischarged bankruptcy is a bankruptcy that’s been started but has not yet been completed.

What happens once I’m discharged from bankruptcy?

Once you’re discharged, you can start rebuilding your credit and making financial plans that were stalled because of your bankruptcy. However, it’s crucial that you avoid making the same financial mistakes you did in the past that led to your bankruptcy filing. To do this, create a realistic budget based on your current finances to effectively manage your finances.  Applying for credit and making timely payments will help you help rebuild your credit. Just make sure that you’re able to keep up with the payment schedule. Meanwhile, keep tabs on your expenditures so you don’t spend more than you make.

What happens during a bankruptcy discharge?

Bankruptcy discharge is the last step of bankruptcy. After you’ve met all the requirements, your trustee will request a discharge on your behalf from the court, who will provide you with a Discharge Certificate confirming your discharge.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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