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If you have unsecured debt of under $10,000 and live in the Province of Ontario filing bankruptcy may not be the best option for you. We suggest you contact the Office of the Superintendent of Bankruptcy at 416-973-6441 to discuss your options, or you can visit their website here.

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Is the CRA beyond the power of the Trustee ?

Please enlighten me about the power of the CRA with regards to any garnishments or seizures that make take place immediately prior to the Trustee filing the bankrupcy papers for a client.

It would almost appear that the CRA does not have to relinquish to the Trustee any goods, property, vehicles, bank funds that they seize immediately prior to a Trustee filing on behalf of a client ?

Is this correct… or is the CRA bound with the same terms that a bank or other creditor might face if they had seized goods in the short period prior to the consumer submitting for bankrupcy protection ?

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One Response to “Is the CRA beyond the power of the Trustee ?”

A licensed trustee said...

The Canada Revenue Agency, CRA (formerly called Revenue Canada) has the sames rights, responsibilities and restrictions that every other creditor is afforded under Canadian bankruptcy law.

Without getting too technical – the Bankruptcy and Insolvency Act is designed to deal primarily with unsecured creditors. For the most part, all unsecured debts are given equal treatment under the law (for those of you familiar with the law, Section 136 gives some priority to “preferred claims”, to keep this blog simple they are being ignored).

The government is somewhat unique in two very interesting ways:

(1) they are enormous – no other creditor has the same level of access to information about a person or business as the various branches of the government. No other creditor has the resources that available to the government should they choose to use them

(2) the government often has secured claims and “trust” claims in addition to their unsecured debts. Any secured creditor may advance their claim after bankruptcy has been filed. This is because at some point the debtor has said “if I don’t repay this debt then you may take the item pledged as security”. Trust claims, once proven, are specifically excluded from bankruptcy proceedings. Admittedly, very few people or businesses other than the government advance trust claims – they simply aren’t very common for the average person.

To answer the question you pose in your second paragraph, any creditor that has taken steps to recover their debt before a bankruptcy is filed may keep whatever money they have recovered before a trustee is appointed.

For instance, if a finance company obtains a Court Order to garnishee someone’s wages the Order will be stopped (Stayed is the techincal term) when bankruptcy is filed. Any money the finance company has already received they will keep – they simply have no right to take anymore. CRA has the same rights.
No better, no worse.