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Frequently Asked Questions

Can Tax Debts be Eliminated?

<p>The Income Tax Act and Excise Tax Act forbid CRA (formerly Revenue Canada) from directly accepting a settlement of less than 100% of the principle amount owed for income tax, GST and payroll deduction debts.</p>

<p>These debts can however be compromised or eliminated totally by filing a proposal or filing for bankruptcy.</p>

<p>If you have a significant tax debt it is critical that you seek advice promptly. CRA have the ability to seize bank accounts and other assets, garnishee income, off-set refunds, etc. Some actions they take to protect themselves can be difficult to correct.</p>

<p>An new category of "Tax Debtor" has been created for people who owe over $200,000 to Canada Revenue Agency where the tax debt is equal to or exceeds 75% of their total debt. These debtors are not entitled to an automatic discharge in bankruptcy and a Court Hearing will be delayed to:</p>

<ul> <li>At least 9 months for first time bankrupts with no surplus income;</li> <li>At least 21 months for first time bankrupts with surplus income;</li> <li>At least 24 months for second time bankrupts with no surplus income;</li> <li>At least 36 months for second time bankrupts with surplus income.</li> </ul>

<p>The Court will be considering the following factors when considering the discharge application of a tax debtor:</p>

<ul> <li>The circumstances of the bankrupt when the debt was incurred;</li> <li>Any efforts made to pay the debt;</li> <li>Payments made to other creditors;</li> <li>The bankrupt's future prospects;</li> <li>If the tax debt relates to obligations as a <strong>director</strong>, these <strong>do not apply</strong> in the calculation of the $200,000.</li> </ul>

<p>The legislators are clearly attempting to discourage people from paying other creditors in priority to Canada Revenue Agency. It appears they are also attempting to encourage people to file a Proposal rather than a bankruptcy if you are a tax debtor.</p>

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DISCLAIMER
All of the information on this website is provided as general information to those seeking general answers to their questions.

This information should not be construed as professional advice.

Every insolvency situation is different and the outcome of each will very depending on its unique circumstances.

Do not rely on this information, or take any steps which are based upon this information without first seeking professional advice.

To obtain specific professional advice a questionnaire must be completed and a personal evaluation conducted by our Trustee.