C. The Court’s Power to Grant or Refuse Discharge

Author:Roderick J. Wood
Profession:Faculty of Law. University of Alberta

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On a hearing of an application for a discharge, a bankruptcy court is given the power to make the following orders:31

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· grant an absolute discharge;

· grant a conditional discharge;

· suspend the operation of the order for a specified time; and

· refuse a discharge.

The conditions attached to a conditional order must relate to the debt-or’s post-discharge earnings or income or after-acquired property. A conditional order can be also subject to a suspension.32A court cannot make an absolute discharge if there has been proof of any of the following facts:33· the debtor’s assets are not of a value equal to fifty cents on the dollar unless this has arisen from circumstances for which the debtor cannot justly be held responsible;34· the debtor has failed to kept proper business books and records;35· the debtor continued to trade after becoming aware of being insolvent;36· the debtor has failed to account satisfactorily for any loss of assets;

· the debtor contributed to the bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling, or by culpable neglect of the bankrupt’s business affairs;

· the debtor put creditors to unnecessary expense by frivolous or vexatious defence;

· the debtor brought a frivolous or vexatious action;37· the debtor made an undue preference to a creditor when unable to pay debts as they became due;38· the debtor incurred liabilities in order to make the bankrupt’s assets equal to fifty cents on the dollar;39

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· the debtor was previously bankrupt or made a proposal to creditors;

· the debtor has been guilty of any fraud or fraudulent breach of trust;

· the debtor committed a bankruptcy offence;

· the debtor failed to comply with an order to pay surplus income;

· the debtor could have made a viable proposal to creditors but chose bankruptcy; or

· the debtor failed to perform the duties imposed on the bankrupt under the BIA or pursuant to a court order.

Upon proof of any of these facts, the court may refuse the discharge, suspend it, or make an order for a conditional discharge. Although a court may make an order for a conditional discharge even if one of these facts is not proven,40there is less latitude given to the kinds of orders that can be made. In such cases, the condition must relate to post-bankruptcy earnings or income or after-acquired property. The power given to a court to make a conditional order for discharge is wider when one of the...

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