You dealt with the intense anxiety of having to pay off your debts for a very long time, and decided to take all of the necessary steps to get rid of them. After the struggle of paying back your debts on time and remaining frugal for so long, you finally succeeded and paid everything off and are free of your debts. You think it’s high time you receive your debt discharge — except it’s being challenged. So what happens next? Read on to find the reasons as to why your debt discharge is being challenged and the steps you need to take in order to finally be free.
What is a debt discharge?
A debt discharge is the final process in your bankruptcy or consumer proposal. It occurs when all of your debts have been expunged. In a bankruptcy, a debt discharge will usually take between 9 to 21 months, whereas in a consumer proposal, your debts can be discharged after up to 5 years. Once all of your debts are paid off, the debt discharge will occur automatically and you will receive a certificate from your licensed insolvency trustee.
When can a debt discharge be challenged?
Unfortunately, things often aren’t so simple and the certificate you’ve been working so hard to receive might just be out of reach for a little while more. But you might be wondering, “why is my discharge being challenged?” There are a couple of possibilities.
Not all involved are in agreement
The first one is that it’s not just your trustee who who needs to agree to your debt discharge. A debt discharge comes with a few conditions. The ones that must agree to it are your trustee, your creditors, and the Office of the Superintendent of Bankruptcy (OSB). Although it’s rare, some creditors might oppose your debt discharge because they either don’t fully comprehend the process, or because they believe they might receive more money from you if they contest it.
You haven’t attended your meetings
In order to have your debts discharged, one of the conditions is that you have to attend two counselling sessions that will how to budget and manage your money better for the future so that you don’t find yourself in the same situation. These counselling sessions will either be held with your trustee or with someone they refer you to.
It’s your second time declaring bankruptcy
Although first-time bankruptcies can take 9 to 21 months for the debt to be automatically discharged, a second time bankruptcy can be a lengthier process. For a second time bankruptcy, the process could last 24 months to 36 months depending on whether or not they need to make surplus income payments.
You have over $200,000 in income tax debt
If you have over $200,000 in income tax debt, then the decision for debt discharge won’t be decided by your creditors or your LIT. Instead your debt discharge can only be approved after a court hearing, which will then determine what steps you need to take in order to be discharged.
If, after following these guidelines, you’ve finally been cleared of your debt, but are worried about your credit score holding you back, contact a licensed insolvency trustee in order to receive the best plan of action for your personal situation. Your LIT will help you in your journey to acquiring a good credit score so that you can be financially stable, free of stress, and able to live your life without any constrictions.