Can Bankruptcy or Proposal help with Income Tax Debts?
It’s that time of year again when most of us are receiving our income tax assessments and some of you may not be prepared for the bill.
We often are asked; can a bankruptcy or proposal help with tax debts?
The short answer is yes!
Just as it is with any other unsecured debt you may have, upon filing a consumer proposal or a bankruptcy, a stay of proceedings (legal stop to collection activity) kicks in and includes most, if not all of your debts owing to the Canada Revenue Agency (“CRA”).
Examples of debts owing to the CRA include personal income tax, GST and source deductions. These debts can be extinguished by obtaining a discharge from bankruptcy or released on completion of a consumer proposal for any amounts you owe up to the date of filing. Your Licensed Insolvency Trustee (“LIT”) will ensure you understand if there are any issues with your debts with CRA.
If you continue to be self-employed during the bankruptcy or consumer proposal proceedings, you may be required to pay installment payments on current income tax, GST or Source Deduction Debt. It will be important to keep current with any post-filing obligations to show good faith. This is especially important to show that you are not going to get into the same situation again.
If you are concerned about unpaid taxes owing to the CRA, contact D. Thode & Associates Inc. today for a free consultation. We will ensure your options are explained to you and find a solution that works for you and your creditors.