Can I include tax debt in my bankruptcy filing?

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In Canada, you can include tax debts in bankruptcy filings, but remember, these debts typically need to be over three years old from assessment to be cleared. Be cautious, though—debts linked to fraud or evasion aren’t wiped away through bankruptcy. Assess your situation carefully before filing.

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Question

Can I declare bankruptcy for tax debt? I want to find out if I can include my tax debt in a bankruptcy filing.

From: Anonymous Question, Newfoundland (NL)

Answer

In Canada, you can include your tax debts when filing for bankruptcy, but there are some key things you’ll want to keep in mind. Typically, income tax debts can be wiped out through bankruptcy if they’re older than three years from when they were first assessed. So, you’ve got to wait at least three years after that tax year to consider declaring bankruptcy. However, if those tax debts have anything to do with fraud or tax evasion, bankruptcy won’t save the day. That’s why it’s super important to take a good look at how old your tax debts are and get a sense of the situation before jumping into a bankruptcy filing.

From: Insider Scott

OSB Based Answer

Yes, you can include your tax debt in a bankruptcy filing in Canada, but certain conditions apply. According to the Bankruptcy and Insolvency Act (RSC 1985, c. B-3), tax debts, specifically those related to income tax, can be discharged in bankruptcy after a certain period. Section 178(1)(a) states that income tax debts that are more than three years old from the date they were due can be included in your bankruptcy. However, it is important to note that tax debts arising from fraudulent activities or unfiled returns may not be dischargeable. For detailed conditions, refer to the relevant sections of the Act and consult a professional for specific cases.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

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