Bankruptcy

If you live in the (519) area code call 310John and we can help you sort through your debt issues.

Bankruptcies with High Tax Debts
Many people believe that you cannot file bankruptcy if you owe Canada Revenue Agency (CRA) money for tax debt. This is not true. However, CRA is different from other creditors, as they have no choice in whether or not to lend a person money. For example, a company can make a choice to lend money and can base their decision on the various criteria, before coming to the decision of whether or not to lend money. CRA does not have this ability to stop a person from becoming indebted to them, and therefore, in the last amendments to the Bankruptcy & Insolvency Act, a provision was inserted into the Act requiring that any person who files bankruptcy and owes CRA in excess of $200,000 and where this debt represents 75% or more of the value of the creditors in the bankrupt estate, a court hearing is required to determine if any conditions should apply on the bankrupt’s discharge.

It should be noted that $200,000 amount does not include any amount that a person may be liable to CRA for, as a result of being a director of a failed business and having been assessed with the director liabilities.

CRA does review these situations on a case by case basis, and it is common practice for them to be present at Court and to ask that some form of conditions be attached to your discharge.

As a minimum, we recommend that you stay current with your filings and up to date with your instalments to CRA during your bankruptcy. Bankruptcy is intended to be a rehabilitative process and therefore the Court will want to see some proof that you are rehabilitated and not falling back into the same cycle of not being current on your taxes.

Other than stated above, the personal bankruptcy of a high tax debtor is follows the same process as any other personal bankruptcy.