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.