taxes « Bankruptcy Ontario: Free Information about Bankruptcy in Ontario

Bankruptcy and Revenue Canada

Friday, August 5th, 2011

Question: I have a number of debts to rev can, and the province of ontario for a small busines that I had a nember of years ago. Rev can is probably $50K, Ont, is $300K. I can likely cut those in half with appeals, and proper filing, as the bulk of it is penalties for not filing. Is it better to reduce them before filing for bankruptcy? or does it matter?

Answer: In your case, yes, it might matter. If, when you declare bankruptcy in Canada, you owe more than $250,000 in taxes, and if your tax debts represent more than 75% of your total debt, you are not eligible for an automatic discharge from bankruptcy. That means you would be required to go to bankruptcy court, and it would be up to the court to decide how much, if any, of the tax debt you would be required to repay. The court may not make you repay anything, or they might.

So, in your case, ensuring that your tax debt is less than $250,o00 could make your bankruptcy simpler.

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second bankruptcy in Ontario and tax return

Monday, January 25th, 2010

Question: I filed for a second bankruptcy in Ontario (previous in 1990) in March 2008 along with my husband, because of his business failure. The Trustee filed our returns for 2007 and 2008. We did not receive any assessment notice from Revenue Canada. According to her we will be discharged this year. Will I be entitled to my tax return refund for 2009 or is it dependent on my discharge date? Will Revenue Canada inform me if the return goes to the trustee and not to me? Thank you.

Answer: That’s a question you should ask your trustee. Under normal circumstances Canada Revenue Agency will send your tax refund for all prior years (2007 in your case) and the year of bankruptcy (2008 in your case) to your trustee for distribution to your creditors. In most cases your tax refund for the year after bankruptcy does not become property of the estate, and is returned to the bankrupt.

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FIled bankruptcy 7 yearas ago, did not get discharged, now more trouble

Thursday, January 21st, 2010

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).

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Need Help – taxes owing – is bankruptcy the answer?

Thursday, January 21st, 2010

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.

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Revenue Canada and GST Accounts

Monday, November 23rd, 2009

Question: If I were to file bankruptcy in Ontario, would this include any monies owing to Revenue Canada and any GST accounts. An immediate answer would be appreciated.
Thank You

Answer: Yes, bankruptcy in Ontario includes debts owed to Revenue Canada for taxes and GST. Your trustee can provide you with more detailed information.

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revenue canada and bankruptcy

Wednesday, April 22nd, 2009

Question: does revenue canada get put in as a list of debts that you can cover in aq bankrupsy or are you still liable to pay them the full amount?

Answer: Does owed to CRA (Canada Revenue Agency) are discharged in a bankruptcy, just like bank loans and other debts. Your trustee can explain the requirements in more detail.

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bankruptcy and income tax

Wednesday, April 22nd, 2009

Question: I am in the situation where my only alternative to peace of mind and finances is bankruptcy. If I file my tax return before I file for bankruptcy do you still lose the return or is this collected by the trustee to go towards paying some debt off?

Answer: If you have received your tax refund before you file for bankruptcy you don’t lose your refund for the prior year. Under current rules you lose your tax refund for prior years if you haven’t received them yet, and you lose your tax refund for the year of bankruptcy.

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outstanding taxes and bankruptcy

Thursday, April 2nd, 2009

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.

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income tax the year of bankruptcy

Thursday, September 11th, 2008

Question: Why is the income tax during the year of bankruptcy done for you by the trustee ? and why do you lose any refund after paying a surplus payment for the 9 or 21 months ?

Answer: The short answer is: because it’s the law. Under the Bankruptcy & Insolvency Act, all assets (except those that are exempt, such as your personal belongings) become assets of your bankruptcy estate, and they are distributed to your creditors.

To determine whether or not the government owes the bankrupt any money, the trustee is required to file all outstanding tax returns, including a tax return up to the date of bankruptcy. If there is a refund, it goes to the creditors. If there are taxes owing, they are discharged in the bankruptcy.

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