Does bankruptcy clear taxes?

_{bankruptcy clear taxes, Whether bankruptcy clears taxes, British Columbia}

In Canada, declaring bankruptcy may help erase certain tax debts, like personal income taxes and GST/HST owed to the Canada Revenue Agency. However, if your tax debt tops $200,000 and exceeds 75% of your unsecured debts, court approval is required for discharge. Tax liens and debts from shady dealings won’t go away. Reach out via phone, text, or live chat if you have any questions. Not all trustees can be trusted.

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Bankruptcy Clear Taxes Question

Does bankruptcy clear taxes? If I owe taxes, will filing for bankruptcy clear those debts?

From: Anonymous Question
Location: Coquitlam, British Columbia (BC)
Category: personal bankruptcy

Bankruptcy Clear Taxes Answer

In Canada, bankruptcy can help you wipe clean certain tax debts, like personal income tax and GST/HST that you owe to the Canada Revenue Agency. Typically, these debts are discharged once you complete the bankruptcy process. But, there’s a catch! If your tax debt is over $200,000 and accounts for more than 75% of your total unsecured debts, you’ll need to have a chat with the court to see if you qualify for discharge. And remember, tax liens are like that stubborn coffee stain on your favorite mug—they stick around even after bankruptcy. Plus, debts from dodgy dealings or tax evasion? Those don’t get written off.

From: Insider Adam

Office of the Superintendent of Bankruptcy (OSB) Answer

In Canada, filing for bankruptcy does not automatically clear tax debts. According to the Bankruptcy and Insolvency Act, specifically section 178(1)(a), income tax debts may be discharged if they meet certain criteria, including that they were due more than three years before the date of bankruptcy. However, tax debts that are considered “super-priority” (e.g., certain amounts owed under the Income Tax Act such as GST/HST) may not be discharged.

To clarify, if the tax debts are from returns that were filed more than three years before the bankruptcy filing, and if there was no gross negligence in the filings, these debts can be discharged. It is important to review the specific conditions and consult a licensed insolvency trustee for detailed guidance regarding tax debt.

From: OSB Helper

Related Questions to Whether Bankruptcy Clears Taxes

Here are the top 5 most frequently asked questions related to the topic of whether bankruptcy clears taxes, based on current trends and concerns:

1. Does bankruptcy clear all types of tax debt?

No, bankruptcy does not clear all types of tax debt, especially if certain conditions are not met.

2. Can personal income tax debt be discharged through bankruptcy?

Yes, personal income tax debt can be discharged through bankruptcy, except under specific circumstances.

3. What happens to tax returns during the year of bankruptcy filing?

The tax year is split into two tax returns: a pre-bankruptcy and a post-bankruptcy return, with only the pre-bankruptcy debt being included in the bankruptcy.

4. Are there any exceptions or conditions for clearing tax debt through bankruptcy?

Yes, if the tax debt exceeds $200,000 and represents more than 75% of total unsecured debt, a court hearing is required to determine the discharge.

5. Can bankruptcy clear GST/HST and other government debts?

Yes, bankruptcy can clear GST/HST and other government debts, similar to personal income tax debt, subject to the same conditions and exceptions[2][4][5].

If you have a question about debt see our debt questions or ask your own debt related question.

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