Does Bankruptcy Or a Consumer Proposal Clear Government Taxes?
As someone trying to navigate the complex world of finances, one question may be looming in your mind: Do government taxes go away in a bankruptcy or proposal? This query is especially pertinent for those burdened with tax debts and considering bankruptcy as a potential solution.
Understanding the Basics of Bankruptcy
Before we delve into the specifics of taxes in bankruptcy, let’s first understand what bankruptcy is. Bankruptcy is a legal process that allows individuals or businesses struggling with debt to gain a fresh start.
The Role of Taxes in Bankruptcy
Just like any other form of debt, most types of taxes can be dismissed in bankruptcy. These include personal income taxes, corporate income taxes, and GST debt.
How Does Bankruptcy Affect Tax Debt?
The main question here is “Do Government Taxes Go Away In A Bankruptcy Or Proposal?” The answer is yes, but with certain conditions.
What Taxes Can Be Dismissed in Bankruptcy?
The following types of taxes can be included in bankruptcy:
- Personal income taxes;
- Corporate income taxes;
- GST debt;
- Director’s Liability on corporate tax or GST;
- Interest and penalties on the above debts.
However, there are exceptions.
Exceptions to Tax Dismissal in Bankruptcy
There’s a catch when it comes to dismissing tax debts in bankruptcy. This involves the Canada Revenue Agency (CRA) and its ability to register against your property.
What Happens When CRA Registers Against Your Property?
If you own a property and owe personal income taxes, CRA can apply for a Federal Court judgment against you. This judgment can then be registered against your property, effectively placing a mortgage on your home.
The Impact of Bankruptcy on Property Owned
Filing for bankruptcy while owning property can be tricky. If you choose to keep your property, you will still have to pay the amount of CRA’s judgment. The bankruptcy won’t erase this debt.
Preventive Measures: Filing Bankruptcy Before CRA’s Registration
There’s a silver lining to the cloud. If you file for bankruptcy before any registrations are in place, CRA can’t file any registrations after the bankruptcy has started.
Wrapping Up
In the end, whether government taxes go away in bankruptcy or proposal largely depends on your specific circumstances. Navigating this process can be daunting, but with professional guidance, it can be manageable.
