If you owe Canada Revenue Agency for income taxes, GST, or employee remittances, these debts can be included in a bankruptcy and can be discharged under certain conditions. Generally speaking, a discharge of the debt is granted if you have completed your duties under the Bankruptcy and Insolvency Act and you have complied with making the appropriate filings and installment payments under the Income Tax Act. If CRA has taken appropriate steps prior to the date of bankruptcy to realize on the indebtedness but has been unsuccessful, CRA may then register as a secured creditor against real property (real estate) or your personal property (furniture, vehicles, etc.). We can review with you in detail the rights and remedies of CRA in your particular situation.
If you are a first time bankrupt and you owe CRA more than $200,000 for personal income tax debt (including interest, penalties or fines) and this amount represents 75% or more of the proven unsecured claims in your bankruptcy, you will not be eligible for an automatic discharge. In this case, the Trustee will be required to make an application to court to seek the terms of your discharge from bankruptcy. You will be required to submit monthly statements of income and expenses for at least 9 months. If you are required to pay $100 or more of surplus income under the Superintendent’s Standards in the first 9 months, the Trustee will be unable to make an application to court for your discharge until 21 months have expired. If you should have no surplus income under the Superintendent’s Standards in the first 9 months, the Trustee will make an application to court for the terms of your discharge when the 9 months have expired. For further clarification, please refer to the following diagram:
If you have been bankrupt before and you owe CRA more than $200,000 for personal income tax debt (including interest, penalties or fines) and this amount represents 75% or more of the proven unsecured claims in your bankruptcy, you will not be eligible for an automatic discharge. In this case, the Trustee will be required to make an application to court to seek the terms of your discharge from bankruptcy. You will be required to submit monthly statements of income and expenses for at least 24 months. If you are required to pay $100 or more of surplus income under the Superintendent’s Standards in the first 24 months, the Trustee will be unable to make an application to court for your discharge until 36 months have expired. If you should have no surplus income under the Superintendent’s Standards in the first 24 months, the Trustee will make an application to court for the terms of your discharge when the 24 months have expired. For further clarification, please refer to the following diagram:
