Personal bankruptcy discharges - preparing for and arguing an opposed discharge

20 minute read
01 July 2014

Co-authored with Ted Michalos, Hoyes, Michalos & Associates Inc. and Sheldon Title, MNP Ltd.


A bankruptcy discharge hearing is the forum for the Court’s determination of a bankrupt’s application for discharge which has been opposed by one or more of: a creditor, the Trustee, or the Superintendent of Bankruptcy. This paper will aim to provide practical advice on preparing for and arguing an opposed discharge, whether from the perspective of the bankrupt, an opposing creditor, or the Trustee.1


A discharge from bankruptcy releases the bankrupt from all claims provable in bankruptcy, pursuant to section 178(2) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”).2 Claims which are not released by an order of discharge, are prescribed by section 178(1), and include eight classes of debts.  

The timelines concerning an automatic discharge of a bankrupt are prescribed by s. 168.1 of the BIA. As a result of the BIA amendments in September, 2009, these are now as follows:

i) 9 months for a first-time bankrupt with no surplus income obligations

ii) 21 months for a first time bankrupt with surplus income obligations

iii) 24 months for a second time bankrupt who does not owe surplus income obligations

iv) 36 months for a second time bankrupt with surplus income obligations4

Oppositions to the automatic discharge of a bankrupt are prescribed by s. 168.2(1) of the BIA, which requires a creditor, the Trustee or the OSB to provide notice of opposition in the prescribed form and manner prior to the automatic discharge date. Once a creditor, the Trustee or the OSB opposes the automatic discharge of a bankrupt, the Trustee is required to apply for an appointment for the discharge hearing.5

Other procedural requirements imposed upon the Trustee include: 

i) giving 5 days’ notice to the bankrupt that the Trustee intends to apply for an appointment for the discharge hearing

ii) preparation of an application to Court to fix a date for the discharge hearing

iii) once the date is fixed by the Court, the Trustee is required to send out a notice, not less than 15 days prior to the scheduled hearing date to the OSB, the bankrupt, and every proven creditor.6

The Trustee is further required to prepare a Report of Trustee on the Bankrupt’s Application for Discharge pursuant to s. 170(1) of the BIA, which must be filed at least 2 days prior to the discharge hearing with a copy forwarded to the OSB, the bankrupt and every creditor who has requested a copy at least 10 days prior to the scheduled hearing date. It is ordinary practice for the Trustee to send its s. 170(1) Report to any opposing creditor. The Trustee’s s. 170(1) Report indicates inter alia, the Trustee’s recommendation concerning the bankrupt’s discharge.7 

The OSB may also file a Report, as may be deemed expedient or necessary for the hearing.8 In respect of bankruptcy discharges, the OSB’s primary mandate concerns debtor compliance with the BIA, and with the integrity of the Bankruptcy system. The OSB may not necessarily oppose a bankrupt’s discharge, but may direct or indicate expectations of the Trustee to oppose a bankrupt’s discharge. This commonly occurs following findings made on examination of the bankrupt by the Official Receiver,9 which are reported upon and contained in a Report prepared by the OSB.


For most regions in Ontario, a discharge hearing is usually conducted before a Registrar in Bankruptcy of the Bankruptcy Court, which falls within a Registrar’s jurisdiction pursuant to s. 192(1) of the BIA. In other jurisdictions in Ontario, a discharge hearing may be held before a Judge of the Superior Court of Justice.10 A Registrar may refer any matter within its jurisdiction including a discharge hearing to a Judge, which may occur in the rare case.    

Power of the Court

Pursuant to s. 172 of the BIA, the Court may:

i) grant or refuse an absolute order of discharge

ii) suspend a bankrupt’s discharge

iii) grant an order of discharge subject to terms or conditions (make a conditional order of discharge)

If any facts referred to in section 173 of the BIA are proven, the Court may include in any conditional order, payment terms or such other terms as the Court may direct. If no s. 173 BIA facts are proven, the Court may nonetheless impose a conditional order which includes terms concerning a bankrupt’s earnings or income, or after-acquired property.11

Suspending the Bankrupt’s discharge and making a conditional order may be made concurrently. 

In certain circumstances the Court may refuse a discharge. A refusal may be ordered with or without conditions required prior to a bankrupt being able to seek leave to re-apply for a discharge.

In the case of high personal income tax debtors (over $200,000 of personal income tax debt, which represents over 75% of the bankrupt’s total unsecured proven claims), a discharge hearing must be held after any of the ordinarily prescribed periods for an automatic discharge prescribed by s. 172.1 of the BIA (i.e. after 9 months; 21 months; 24 months; or 36 months as discussed prior).12 ‘Personal’ income tax debt does not include GST or an income tax debt that arose from an assessment for directors’ liability.    

The Court may also adjourn a scheduled discharge hearing whether prior to commencement or after commencement of a hearing and direct the parties accordingly in respect of further disclosure, or the obtaining of an interpreter, etc. In the Toronto Bankruptcy Court, if a discharge hearing is anticipated to be longer than 30 minutes, the Court will ordinarily adjourn the hearing to a special long matter date, which is coordinated through the Bankruptcy Court office.

Preparation for a Discharge Hearing

From a Trustee’s perspective. 

The Trustee is an officer of the court and represents the body of creditors as a whole. Aside from its statutory duties prior to the discharge hearing date, the Trustee will ordinarily have its file available at the discharge hearing and often assists the Court with factual information obtained during its administration. The majority of Trustee oppositions are the result of an omission or failure by the bankrupt to adequately perform his/her duties as set out in s. 158 of the BIA, including the obligation to attend mandatory counselling.13 If the Trustee is satisfied that the bankrupt has subsequently complied with his/her duties, and if there are no further substantial grounds for opposition, then the Trustee will ordinarily withdraw its opposition prior to or at the discharge hearing. The Trustee may also have opposed the bankrupt’s discharge in connection with ‘property’ issues as they relate to the bankrupt’s duties, given the Trustee’s mandate to realize upon all property of the bankrupt. While the discharge of a bankrupt and realization upon property of the bankrupt are not mutually exclusive, the Trustee will ordinarily aim to resolve all property issues prior to the discharge hearing if possible. 

The Trustee may also share the same concerns and grounds for opposition as an opposing creditor, and a creditor’s opposition itself may provide the Trustee with new information and areas/avenues for review concerning the bankrupt.  The Trustee also seeks to assist the bankrupt generally, by providing information to the bankrupt as to procedure, and also the potential advisability of retaining counsel. It is important to recognize however, that the Trustee does not legally represent the bankrupt, and the Trustee cannot advocate for the bankrupt or ‘prepare’ the bankrupt for a discharge hearing. Nonetheless, the Trustee often acts as a conduit between the bankrupt and an opposing creditor and/or the OSB, to promote a settlement or resolution of the issues. The Trustee may also retain its own counsel in respect of a discharge hearing.     

From an opposing creditor’s perspective

Critical information is gleaned from the Bankrupt’s sworn Statement of Affairs; the Trustee’s Report; any s. 161 BIA examination conducted by the Official Receiver; any s. 163(1) BIA examination conducted by the Trustee; and any s. 163(2) BIA examination conducted by the creditor.

Written questions may also be posed to the Bankrupt prior to the discharge hearing which the Bankrupt is obliged to answer in accordance with the Bankrupt’s duties under the BIA. 

The opposing creditor seeks to establish s. 173 BIA facts and other grounds for opposing the bankrupt’s discharge, as set out in the opposing creditor’s notice of opposition. The notice of opposition should be sufficiently clear as to the grounds for opposition and should not contain frivolous or unfounded allegations (for example, alleging s. 173(1)(k) where here has been no criminal conviction of fraud or fraudulent breach of trust).14

Organization of documents and evidence relied upon is important in conducting an efficient cross-examination and presenting an opposing creditor’s position — a document brief is often useful to both counsel and to the Court.

It is important to ascertain whether an appropriate notice of opposition has been filed in a timely manner. If another creditor or the Trustee or Superintendent has already filed an opposition to discharge and a hearing date is obtained, a notice of opposition may be filed by any other creditor, so long as it is prior to the discharge hearing date.15 Notwithstanding, the Court may question optics and propriety if a creditor suddenly opposes at the eleventh hour.        

There is a danger in ‘sheltering’ behind the Trustee’s or another creditor’s opposition, given for example, the Trustee may withdraw its opposition prior to the hearing date, or at the hearing. Alternatively, the grounds set forth in another creditors’ opposition may be materially different.

A creditor should also assess costs versus benefits in proceeding with an opposed hearing versus seeking a resolution or even a withdrawal of opposition.16 Although a creditor may seek costs if any conditional order for payment is made by the Court,17 actual recovery is dependent upon what proceeds are actually paid under any conditional order, together with what dividends may be received based on the value of a creditor’s claim in the estate.       

From the Bankrupt’s perspective

A bankrupt’s goal is obviously an absolute discharge from bankruptcy, or alternatively a conditional discharge on as favorable terms as possible. Most bankrupts are self-represented at their discharge hearing, and at times may be unaware that they may require representation.

If representing a bankrupt, counsel should seek to obtain clarity in respect of any notice of opposition. Prior to the discharge hearing, particulars may be requested concerning grounds for opposition raised by an opposing creditor, the Trustee, or the OSB. Counsel should also review whether there are any inaccuracies in respect of any report,18 or in respect of the bankrupt’s Statement of Affairs or any other document which the bankrupt has signed or provided to the Trustee, which should either be corrected or addressed.19  

Counsel will also wish to obtain copies of any documentary or affidavit evidence to be relied upon by an opposing creditor or the Trustee, and may also wish to know the identity of any witnesses. 

Counsel should also ascertain if there are any unfulfilled duties by a bankrupt (for example, providing outstanding income tax information) or outstanding surplus income payments required. Addressing and resolving these with the Trustee prior to the scheduled discharge hearing is highly desirable, and may result in a resolution (for example, a consent conditional order for payment of outstanding surplus income), or alternatively in narrowing the issues.  Resolution of unfulfilled duties prior to the discharge hearing will also present your client in a more favorable light if there are other issues concerning s. 173 of the BIA. 

As with any trial, potential resolution prior to the hearing with the Trustee, an opposing creditor (and the OSB if applicable) should be weighed against the risk of a contested discharge hearing.

If an interpreter is required, a Ministry of the Attorney General (“MAG”) certified interpreter may be required, as is the case in Toronto. It is best to seek a MAG certified interpreter at an early date given there may be difficulty retaining one for certain languages.

If the bankrupt does not attend, then the Court may grant a ‘No Order’; this will permit the Trustee to seek its own discharge, following which the rights of creditors will be revived if the bankrupt remains un-discharged. In these instances, the bankrupt may later seek to make a fresh application for a discharge, although this will no doubt remain subject to un-fulfilled duties or outstanding issues.  

The Superintendent of Bankruptcy may be in attendance in circumstances where the OSB has opposed the discharge, or alternatively where the OSB has directed the Trustee to oppose the discharge.  As mentioned, pursuant to s. 170(3) of the BIA, the Superintendent is also at liberty to make a Report to Court, and if in attendance, the OSB’s position is informed by policy concerning ‘debtor compliance’ and the overall integrity of the Bankruptcy system.   

Conducting the Hearing, Evidence, and Evidentiary Burden

The discharge hearing is a trial; all rules of evidence applicable to civil trials and the Rules of Civil Procedure apply where the BIA or BIA Rules do not specifically apply.   

The Court will consider the Trustee’s Report;20 any OSB Report; notices of opposition from creditors; affidavit and other documentary material; evidence from any examination under s. 163(1) or s. 163(2) BIA;21 and viva voce evidence called at the hearing. For discharge hearings there is no strict requirement for documentary or evidentiary disclosure prior to the hearing prescribed under the BIA. In practice it is also generally not required to admit the authenticity of documents, although it is desirable for opposing counsel to exchange documents and agree upon a common brief and/or undisputed facts.22 There is no benefit to ambushing any party and the Court will often grant an adjournment if the evidentiary record is not agreed upon or is incomplete.      

The evidentiary burden is upon the bankrupt to satisfy the Court that an order of discharge should be granted.

Because the discharge hearing operates as the bankrupt’s application for discharge, it is common procedure for the bankrupt first to give viva voce evidence before the Court. The bankrupt is provided opportunity to describe the circumstances leading to his/her bankruptcy and factors to be considered by the Court concerning the Bankrupt’s application for discharge. Opportunity is then given to an opposing creditor, the Trustee and the OSB (if in attendance) to cross-examine the bankrupt. The bankrupt may also present witnesses who are also subject to cross examination by opposing parties.

An opposing party may submit affidavit evidence and also introduce witnesses to give viva voce evidence.23 Witnesses produced by an opposing party may be cross-examined by the bankrupt. Expert evidence may also be introduced in accordance with the Rules of Civil Procedure.   

The presiding judicial officer (Registrar or Judge) may and typically asks questions during the discharge hearing and will receive submissions as to disposition following the completion of testimony and cross examinations. As with any proceeding, good submissions are a succinct summation of the evidence and applicable law together with a realistic recommendation/submission as to outcome. It is advisable for counsel to review and become familiar with what outcomes might be anticipated for particular situations and s. 173 BIA facts proved or not proved. 


An appeal from an Order of a Registrar in Bankruptcy lies to a Judge of the Superior Court of Justice pursuant to s. 192(4) of the BIA.24 An appeal of a Registrar’s order or conditional order made on a bankruptcy discharge hearing is not a trial de novo.25

A Registrar’s or Judge’s determination on a discharge hearing is an exercise of judicial discretion. An appeal court may modify or moderate conditions imposed on a discharge hearing. However, the standard for appeal is whether there was any omission of the consideration or the misconstruing of some fact, or violation of some principle of law.26      


Aside from understanding the procedural intricacies associated with a bankruptcy discharge hearing, it is important and often beneficial to consider the perspectives of each of the participants, whether it be the bankrupt, the Trustee, or an opposing creditor, together with what ends may be achieved by proceeding with a contested hearing. As with any trial, preparation and understanding are key elements to success or resolution concerning a bankrupt’s discharge hearing.  


[1] This paper aims to complement a prior, very practical paper by one of the joint authors - Discharge Applications – The Ins and Outs, OBA Institute Conference – Current Topics in Bankruptcy and Insolvency, February 9, 2012, by Brandon Jaffe and Sheldon Title.

[2] s. 178(2), BIA; “claims provable” are prescribed by s. 121, BIA.

[3] s. 178(1), BIA.

[4] s. 168.1, BIA; “surplus income” is defined in s. 68(2) of the BIA as “the portion of a bankrupt individual’s total income that exceeds that which is necessary to enable the bankrupt individual to maintain a reasonable standard of living, having regard to the applicable standards established under subsection (1)”; also reference OSB Directive 11R2-2013.

[5] s. 168.2, BIA. 

[6] s. 168.2(2), 169(6), BIA.

[7] s. 170(1),(2), BIA.

[8] s. 170(3), BIA.

[9] conducted under s. 161, BIA.

[10] s. 192(2), BIA.

[11] s. 172(1),(2), BIA.

[12] s. 172.1, BIA.

[13] s. 168.1(1) BIA (the automatic discharge provisions) does not apply to an individual bankrupt who has refused or neglected to receive counselling under s. 157.1(1), BIA.

[14] See Re: Saban, supra.

[15] s. 170(7), BIA.

[16] Jaffe and Title, Discharge Applications, The Ins and Outs, supra. at para. 5.

[17] s. 197(6.1), BIA.

[18] Under s. 170(6), BIA the bankrupt may contest the statements made in the Trustee’s Report by giving notice;

[19] Jaffe and Title, Discharge Applications, The Ins and Outs, supra. at para. 4.

[20] The Trustee’s Report is considered prima facie evidence and must be accepted unless contradicted by other evidence; although the Court is not bound by the Trustee’s report, it is given considerable weight. See Re Barrick (1980), 36 C.B.R. (N.S.) 286 (B.C.C.A.); Re Simpson (1984), 50 C.B.R. (N.S.) 109 (B.C.S.C.).

[21] s. 163(3), BIA.

[22] Jaffe and Title, Discharge Applications, The Ins and Outs, supra. at para. 6.

[23] s. 170(4), BIA – an opposing creditor may attend in person or be represented by counsel.  However if the opposing creditor is a corporation, it will be subject to the Rules of Civil Procedure requiring representation by counsel. 

[24] s. 192(4), BIA; Rule 30, BIA Rules.

[25] Re: Saban, 2012 ONSC 7009 (Ont. S.C.J. Comm. List).

[26] Indust. Accept. Corp. v. Lalonde (1952), 32 C.B.R. 191, [1952] 2. S.C.R. 109 (S.C.C.); but also see Re Gregoris (1985), 55.C.B.R. (N.S.) 282 (Ont. C.A.).

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