How will bankruptcy reform in Canada affect individuals with high tax debts? Bankruptcy rules defined in bill c-55 make it harder for a person who owes a substantial amount to Revenue Canada to go bankrupt and discharge their debts in the normal first-time bankruptcy period of nine months.
Changes contained in section 172.1 of the Act state that if you are an individual, and owe more than $200,000 in tax debt, and that debt is more than 75% of your total debt, you will not be eligible for an automatic bankruptcy discharge after nine months. You must attend a court hearing, and the bankrupt will have to convince the court that they should be discharged from their debts, based on their efforts to repay the debts, their financial situation when the debt was incurred, and their future financial prospects.
We recommend that you contact our bankruptcy offices in Ontario for more information about impacts of bankruptcy reform on those with tax debts and, specifically, about how for debtors with high tax debts bankruptcy period can be extended.
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