Tax Debt Solutions: Bankruptcy and Consumer Proposal

Tax Debt Solutions

Tax Debt Solutions

Tax debts are a regular part of all our clients’ debts. They are even very common among entrepreneurs and the self-employed who are more likely to accumulate because they are not subject to source deductions. Fortunately, it is possible to get rid of it.

Many believe that tax debts are very different from other debts and that they can not be included in a bankruptcy or in a consumer proposal. This is a myth!

Although the Bankruptcy and Insolvency Act provides certain special provisions for tax debts, these debts remain the basis of unsecured debts. unless steps have been taken to guarantee the debts on your property. Thus, generally, these debts are erased in the context of a bankruptcy or a consumer proposal.

 

Tax notes

Tax notes

However, note the following particularities:

  • If your tax debts exceed $ 200,000 (principal, interest and penalties included) or represent more than 75% of your unsecured debts, your bankruptcy would be considered a tax bankruptcy and special provisions apply.
  • Tax debts eligible to be released are those incurred before the date of the bankruptcy or the consumer proposal. Any tax debts incurred subsequently will not be liberal.
  • If you had to have tax refunds in the year of your bankruptcy or a previous year, Agencies will keep them and apply them on your debts.
  • In the case of a consumer proposal, it is necessary that your tax returns are up to date. Otherwise, your consumer proposal will not be considered.

 

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