Income Tax refund and bankruptcy in Canada
September 5th, 2006 by Questions
I’ve been reading through the archive and I am confused… if I file for bankruptcy this month (sep06), I know that the trustee must do the taxes for jan to sep 06 and then seperate one for sep06 to year end to capture the bankruptcy.
But… does the trustee go back to my previous tax refunds ( I have filed every year and have no back tax problems with CCRA)? If I got say 1000$ back for the 2005 year do I have to find that money to give to the trustee (even though I spent it)? Does it go back further in years and you must find the equivalent money to go to the trustee?
If you could clear this up I would appreciate it, I’m petrified now if I was to file bankruptcy I have to come up with all the tax refund money i’ve gotten the last few years.
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September 05, 2006 at 6:18 pm, A licensed trustee said:
No, unless you have committed fraud, the trustee does not take tax refunds that you received for prior years. When you go bankrupt the trustee will file a tax return for the current year; that’s the refund you lose.
If you had not filed your tax returns for prior years the trustee would file those returns, and you would not receive the refund. This is a complicated area, so I suggest you contact a licensed trustee to arrange for a no charge initial consultation; they can explain the process with tax refunds and bankruptcy in more detail.