At this time of year many people ask us if their tax debts (personal income taxes, company taxes, GST, PST, etc.) can be included in a personal bankruptcy or a consumer proposal.
The answer is yes. Tax debts are generally included in a bankruptcy or proposal.
Most people do not realize that tax debt (Revenu Québec and the CRA) are treated just like credit card debt, lines of credit, etc. In fact, a significant proportion of bankruptcies in Quebec and Canada include tax debts.
However, take note that your tax debts may not be dischargeable if it is a case of fraud or a fine. Otherwise, interest and penalties on your legitimate tax debts can be included in a bankruptcy or a consumer proposal.
If your tax debts represent more than $200,000 (principal, interest and penalties included) or more than 75% of your total debt, you will not get an automatic discharge and you must attend a hearin. This extra step is to prevent abuse of the insolvency system. (Read the article from the Law)
For personalized advice based on your unique situation, do not hesitate to contact us for a free and confidential assessment.
