If you owe Canada Revenue Agency (CRA) 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.).
Furthermore, if your personal income tax debt is more than $200,000 and that debt represents more than 75% of the proven unsecured claims in your bankruptcy estate, then a formal discharge hearing must be held before the Registrar in Bankruptcy. At the hearing, the Registrar will determine appropriate terms of discharge, which may include the requirement to pay more money to your bankruptcy estate or delay your discharge from bankruptcy.
Lastly, a formal discharge hearing may also occur if the CRA has filed a specific opposition to your discharge from bankruptcy. Again, the Registrar will determine appropriate terms of discharge after giving consideration to numerous factors, including your payment and compliance history with income tax filings, size of debt, age, income and income prospects, etc.
We can review with you in detail the rights and remedies of CRA in your particular situation. We offer no-obligation consultations and are open late and on weekends to meet your needs.
