Are my Canada Revenue Agency government debts included in my bankruptcy?
For the most part, the answer to this question is “Yes.”
Filing a proposal or bankruptcy under the Bankruptcy and Insolvency Act is the only method of eliminating Canada Revenue Agency debt.
Outstanding government debts like personal income taxes, harmonized sales tax (HST), or director’s liability for a corporation’s government debts are all discharged by the bankruptcy process.
The only exception is a government guaranteed student loan. Under current legislation, a student loan cannot be discharged unless you have been out of school for 7 years. However, if your other debts are significant, then your financial difficulties may still need to be addressed. It is advisable to discuss your situation with your Trustee to determine the most appropriate method of handling your non-government debts.
The government may take the position overpayments were taken fraudulently by you under the Employment Insurance or Social Assistance programs. Debts classified as fraud are not discharged by bankruptcy. These debts are included in your bankruptcy, and the government’s ability to take any action against you is stayed, or stopped, while you are bankrupt. However, the government may pursue their claims against you after your bankruptcy is completed, and you are discharged.
Income Tax Debt Greater than $200,000
Your discharge from bankruptcy must be opposed by your Trustee if you have $200,000 or more of personal income tax debt, and your personal income tax debt represents 75% or more of your total unsecured debts. You must appear in bankruptcy Court before a registrar who will determine the outcome of your bankruptcy discharge.