The Section 170 Report is a legal document prepared by your Licensed Insolvency Trustee under specific circumstances, such as if you have surplus income, your discharge is opposed, you have a prior bankruptcy, or a court hearing is required. If none of these conditions apply, a first-time bankrupt is automatically discharged after nine months without this report being filed. It details your conduct and financial situation during the process.
When you file for bankruptcy in Canada, the ultimate goal is to receive your “discharge”-the legal release from the obligation to repay your debts. For a first-time bankrupt with no surplus income, this discharge usually happens automatically after 9 months. However, if specific legal circumstances apply-such as having surplus income, facing an opposition, having a prior bankruptcy, or requiring a court hearing-your Licensed Insolvency Trustee (LIT) must prepare a crucial document known as the Section 170 Report (officially Form 82) before your discharge date.
This report acts as a report card on your behaviour during the bankruptcy process. Whether your local court is the Superior Court of Justice in Ontario, the Court of King’s Bench in Alberta, or the Supreme Court of British Columbia, the federal rules surrounding this report are identical. The Section 170 Report tells the Office of the Superintendent of Bankruptcy (OSB) and your creditors whether you have played by the rules. In this guide, we will break down what this report contains, why a creditor might oppose it, and what happens if your discharge is delayed.
Step-by-Step Process: How the Section 170 Report is Prepared in Canada
Your trustee does not simply wait 9 months and hand you a discharge certificate. The preparation of the Section 170 Report involves a thorough review of your file to ensure the integrity of the Canadian insolvency system.
Step 1: Financial Review by Your LIT
For a standard first-time bankruptcy with no surplus income, the file review is initiated around the 8th month. However, if you are required to pay surplus income, your bankruptcy is extended to 21 months, and this review takes place during the 20th month. The trustee will verify that you have attended your two mandatory credit counselling sessions, provided all required monthly income and expense reports, and submitted your tax information for the pre-bankruptcy tax return. They will also check that your surplus income payments are completely up to date.
Step 2: Drafting the Section 170 Report (Form 82)
The trustee will then draft the report. This document outlines the causes of your bankruptcy, details your assets and liabilities, and states whether you have complied with all your legal duties. It is important to note that the Section 170 Report no longer contains the trustee’s recommendation regarding conditional or unconditional discharge, as this section was completely removed from Form 82. Instead, any trustee assessments or reports regarding a dispute or surplus income are handled separately under Section 170.1 of the BIA.
Step 3: Submission to the OSB and Creditors
Once drafted, the Section 170 Report is filed electronically with the Office of the Superintendent of Bankruptcy. A copy is also sent to the Canada Revenue Agency (CRA) if they are a major creditor, as well as to any creditor who has specifically requested to be kept informed. At this stage, creditors have the opportunity to review the report and decide if they want to formally oppose your discharge.
Step 4: The Discharge Outcome (Automatic vs. Opposed)
If the report is positive, and neither the OSB nor any creditors file an opposition, your discharge will happen automatically at the 9-month mark (or 21-month mark if you have surplus income). If the trustee, the OSB, or a creditor opposes the discharge based on the findings in the Section 170 Report, an automatic discharge is blocked, and a court hearing will be scheduled to resolve the matter.
What Can Cause an Opposed Discharge?
An opposed discharge or a mandatory court referral means there is a hurdle you must clear before you can be debt-free. Common reasons for a negative Section 170 Report, creditor opposition, or a required court hearing include:
- Failure to Perform Duties: Missing mandatory credit counselling, failing to provide income proof, or not paying required surplus income.
- Tax Debt Issues: If you owe more than $200,000 in personal income tax and it represents 75% or more of your total unsecured debt, you are not eligible for an automatic discharge under Section 172.1 of the BIA. Instead, a mandatory court hearing must be scheduled by your Licensed Insolvency Trustee to determine the terms of your discharge.
- Fraud or Hidden Assets: If the trustee discovers you transferred property to a family member right before filing (preferential transfer) or hid assets, they will highlight this in the report.
- Excessive Spending: Creditors may oppose if they feel your bankruptcy was caused by reckless gambling, extravagant lifestyle choices, or accumulating luxury debt right before filing.
How Much Does an Opposed Discharge Hearing Cost?
If your Section 170 Report leads to a court hearing, you might incur additional costs. While the trustee will attend the hearing to present the facts to the Registrar in Bankruptcy or a Judge, they do not act as your personal lawyer. If the opposition is serious (for example, allegations of fraud by a major bank), you may choose to hire a local insolvency lawyer. Lawyer fees in Canada for a discharge hearing can range from $1,500 to $3,500 CAD or more, depending on the complexity of the case. Furthermore, the court may order you to pay additional funds into your bankruptcy estate as a condition of receiving your discharge.
How Long Does the Section 170 Process Take?
The timeline is very rigid. If required for a standard 9-month bankruptcy, the trustee prepares the Section 170 Report during the 8th month. If you are required to pay surplus income, the bankruptcy lasts 21 months, and the report is prepared during the 20th month. Creditors generally have 30 days to review it and file an opposition. If an opposition is filed, the delay to get a court date can vary wildly. In busy jurisdictions like Toronto or Vancouver, it might take 3 to 6 months to secure a hearing date before a bankruptcy registrar.
Frequently Asked Questions (FAQ)
Can I see a copy of my Section 170 Report?
Yes. Your Licensed Insolvency Trustee is required to provide you with a copy of the report before it is finalized and sent to the OSB, so you are fully aware of what is being reported.
What happens if I missed a counselling session?
If you miss a mandatory duty, the trustee will note this in the Section 170 Report, and your discharge will be opposed. You will have to complete the missing duty and likely attend court to explain the delay.
Do I have to appear in court if my discharge is opposed?
Generally, yes. You will receive a Notice of Hearing and will be expected to attend (either in person or virtually, depending on the provincial court’s current procedures) to speak to the judge or registrar.
Does the Section 170 Report apply to Consumer Proposals?
No. The Section 170 Report is specific to the bankruptcy process. In a consumer proposal, you receive your Certificate of Full Performance simply upon making your final agreed-upon payment.
Can the CRA oppose my discharge based on this report?
Yes, the Canada Revenue Agency frequently reviews Section 170 Reports. If they feel you have a history of tax evasion or chronic non-compliance, they may file an opposition to demand you pay a portion of the tax debt as a condition of discharge.
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