Bankruptcy in Ontario

Question: As the title says, I filed bankruptcy 7 years ago, due to circumstances the final fee was never paid to the trustee and I am still undischarged. I recently spoke with the trustee and the discharge can go ahead.

However I have accumulated a $20000 debt with revenue canada, and they are garnishing 40% of my income. What can I do about this, if anything?

Answer: The short answer is there is very little you can do. You are an undischarged bankrupt, so you can’t file bankruptcy to eliminate your tax debt until you are discharged from your first bankruptcy.

The most logical approach would be to work with your trustee to get your first bankruptcy finished. At the same time, you could talk to Revenue Canada to see if they would agree to lowering the amount they are garnisheeing, although there is no guarantee they will make any changes.

Once you are discharged from your first bankruptcy you can talk to an Ontario bankruptcy trustee about a second bankruptcy or a proposal. (A second bankruptcy lasts longer and is more costly than a first bankruptcy, so consider all options before filing bankruptcy for a second time).

Question: Me and my twin opened a drywall company as sole partners. Since we have been in business no taxes have been paid but did file for the 2 years. The amount owing is around $80,000. Our business is still running strong bringing in around $75,000 each after all deductions. What is the best solution while avoiding bankruptcy?

Answer: The first option would be to determine, based on your cash flow, how much you can afford to send to Canada Revenue Agency each month. If you can afford to send them $5,000 per month, you will have the debt paid in 16 months. Obviously the faster you pay it the better, because at some point Revenue Canada will contact you looking for their money.

If you cannot make payment arrangements, you may have no choice but to consider a proposal or bankruptcy, but repaying it on your own is the best option if possible.

Question: If i go bankrupt in Ontario will i be clear of any taxes outstanding?

Answer: Yes, taxes are discharged in a bankruptcy. However, there are a number of issues to be aware of with respect to taxes and bankruptcy, so you should consult a licensed Ontario bankruptcy trustee for more information.