The vast majority of people that file for personal bankruptcy never have to appear in Bankruptcy Court. The system is designed specifically to keep you out of Court – it is only in unusual cases or when people fail to complete the process properly that they are required to appear before the Courts.
Reasons For A Bankruptcy Court Hearing
As mentioned, it is rare but it does happen. Usually this is due to a failure to complete your duties required during your bankruptcy or because a creditor has a concern. Here are some situations that would result in a bankruptcy hearing.
You fail to perform all of your required bankruptcy duties properly. Before you file for bankruptcy all of the things that you are required to do during the bankruptcy should be explained to you in detail. This includes:
- providing information about your income, assets, and debts;
- submit proof of income and expenses during your bankruptcy;
- attending credit counselling sessions;
- making all required bankruptcy payments and surrendering non-exempt assets;
Most bankruptcy trustees will have you sign a document asserting that your duties have been explained and that you understand and will comply with the requirements. If you don’t do all of the things that you are required to do when you file for bankruptcy your trustee is not permitted to sign-off on your bankruptcy. Instead, you are required to appear in Court to explain why you haven’t done all of the things you were supposed to do. At the very least, the Court will order you to do all of the things you have failed to do, plus they may add some additional items to the list.
A creditor is concerned that the person that filed for bankruptcy misrepresented themselves in order to obtain credit. In other words, the creditor thinks you lied to them when you applied for the debt or about what you did with the money.
You failed to file and/or pay income taxes for a number of years. Revenue Canada may ask for a court hearing to review the circumstances if your tax debts are substantial. Our practice handles thousands of cases every year and fewer than 1 in every 500 has to appear in Court due to extremely high income tax debts but it can happen. The best solution is to file your returns before filing bankruptcy.
Any creditor can exercise their right to ask the court to review the bankruptcy file. If you have family members as creditors, they can often feel betrayed when someone files for bankruptcy and so they may ask for a court hearing. These cases are less common than the high tax debt cases, but they do happen.
If you have been bankrupt three times. Most bankruptcies end in an automatic discharge, with no need to go to court. However if this is your third bankruptcy you will be required to appear at a discharge hearing before the bankruptcy court to review your bankruptcy and determine the terms of your discharge.
The idea of appearing in Court scares a lot of people. The thing to keep in mind is that most people who file for bankruptcy never have to appear in Bankruptcy Court. It is only the most unusual cases and the people that fail to perform all of their bankruptcy duties properly that have to appear in Court. Don’t let it happen to you – do everything that you are told to do when you are supposed to do it.