The CRA And Bankruptcy Court Decisions

The CRA And Bankruptcy Court Decisions

The CRA And Bankruptcy Court Decisions: An In-Depth Analysis

When a Canadian citizen finds themselves grappling with debilitating tax debt, there are legal recourse options such as Bankruptcies and Consumer Proposals designed to provide relief. Yet, when the Canada Revenue Agency (CRA) enters the picture, the situation can take unexpected turns. This article aims to shed light on the complexities of CRA involvement in bankruptcy cases and court decisions.

The CRA and Its Right to Oppose Discharge

In the instance of a taxpayer’s bankruptcy, the CRA, like any other creditor, possesses the legal right to contest the individual’s discharge. This means they can petition the Bankruptcy Court to determine the case’s outcome. However, it is noteworthy that the CRA generally does not oppose a discharge unless the tax debt is sizable, the taxpayer has neglected to file back taxes, or there are serious allegations such as tax evasion or fraud.

Opposition and Court Hearings

When the CRA opposes a discharge due to the reasons aforementioned, a court hearing is scheduled. Interestingly, even if the CRA shies away from seeking opposition, the Bankruptcy and Insolvency Act (BIA) mandates a discharge hearing if the tax debt exceeds $200,000 and makes up 75% of the total debt.

Negotiations Pre-Hearing

Often, before a hearing, the CRA exhibits a willingness to negotiate a settlement with the taxpayer and the Insolvency Trustee. Such discussions could lead to the taxpayer being discharged from the bankruptcy given that a financial settlement is agreed upon, paid to the Trustee, and all post-bankruptcy tax obligations are maintained.

Discharge Hearings

In unique cases where a settlement remains elusive, a discharge hearing is inevitable. However, it is crucial to stress that these hearings are not criminal trials and do not assume an overly formal or adversarial nature. Some taxpayers even enlist their own legal representation to assist during these hearings.

The Hearing Procedure

The procedure of the hearing begins with the taxpayer outlining reasons for non-payment of tax debt. Following this, the Bankruptcy Court, the CRA, and the Insolvency Trustee query the taxpayer regarding their financial affairs. The CRA representative then has the opportunity to voice their concerns. All parties present their written submissions to the Court, featuring their suggested resolutions. Post review, the Bankruptcy Court pronounces its decision.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.