Directive No. 12 - Terms of Discharge

Interpretation

1. In this Directive,

   "Act"

   means the Bankruptcy and Insolvency Act;

   "conduct and ability to make payments"

   shall relate to subsection 170.1(2), and paragraphs 173(1)(m) and (n) of the Act.

   "trustee"

   means a trustee as defined in section 2 of the Act,

   "assessment"

   means the process of the initial assessment of an individual debtor as described in the Directive entitled "Assessment of an Individual Debtor".

   Purpose

2. The purpose of this Directive, issued pursuant to paragraph 5(4)(c) of the Act, is to instruct trustees on standards for recommending conditions of discharge for a first-time bankrupt pursuant to subsection 170.1(1) of the Act.

   Sections of the Act concerned

   68, 170, 170.1

   Background

3. Subsection 170.1(1) of the Act requires that the trustee make a recommendation on the Section 170 Report as to whether or not the bankrupt should be discharged with conditions, having regard to the bankrupt's conduct and ability to make payments.
   Where the bankrupt agrees with the recommendation of the trustee for the discharge, and where the bankrupt's discharge is unopposed by a creditor or the Superintendent, the trustee's recommendation becomes the conditional discharge of the bankrupt, eliminating the need for a court hearing.
   These changes to the Act are intended to increase returns to creditors and alleviate the backlog of court files.

   Standards

4. Where in the opinion of the trustee,
   1. the bankrupt refuses to comply with the requirement to make surplus income payments to the estate;
   2. the total amount paid to the estate by the bankrupt is disproportionate to the bankrupt's indebtedness and financial resources; or
   3. at the time of assessment, the bankrupt could have filed a viable proposal but chose instead to file an assignment in bankruptcy,
      
   the trustee shall recommend a conditional discharge pursuant to section 5 of this Directive.
   
   
5. 1. A conditional discharge shall be for a period of no longer than twelve months.
   2. For greater certainty, the maximum length of time a debtor could be in a state of bankruptcy with the application of a conditional discharge according to this Directive is twenty-one months.
   3. The payment required in the conditional discharge shall be determined according to the standards established in the Directive on Surplus Income.
   4. The payment required in the conditional discharge may include any unremitted surplus income payments required during the first nine months of bankruptcy.
   5. The trustee shall determine the frequency of payments according to the circumstances of the bankrupt.
   6. The bankrupt may fulfill the requirement of the conditional discharge at any time.
   
   
6. Where the trustee determines that the bankrupt's conduct and ability to make payments justifies a longer period of payments than described in paragraph 5 above, the trustee shall describe these circumstances in his Section 170 Report and oppose the bankrupt's discharge through the court.
   
   
7. The trustee may require the bankrupt to provide or continue to provide financial statements during the term of the conditional discharge.

The Superintendent of Bankruptcy
Marc Mayrand