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I am thinking that in the near future i may have to file bankruptcy or a consumer proposal-my question comes to income tax. If I file my own income tax for 2008 and get a refund but months later I need to claim bankruptcy or a consumer proposal what happens if I have spent my return already. Also how does income tax work in the future with this.

Posted from: Alberta

One Response to “taxes”

Barton Goth – Goth & Company Inc. -Trustee in Bankruptcy said...

The answer to this largely depends on what the tax return is spent on and when you end up filing for the bankruptcy or consumer proposal. If you simply are waiting until after you receive your taxes to file, then this is not appropriate as your actions are being done to intentionally thwart the rights of your creditors. However, most people I come across are not trying to “plan” the filing of a bankruptcy, which can often get the none into trouble, but simply trying to find a way to work things out in the absence of a bankruptcy.

So my advice would be when you get the tax refund spend it wisely. Don’t pay off one creditor over another simply because you like them better or would feel bad if they had to write the debt off in the bankruptcy, even if you are related to them as this is the type of thing that can cause you significant difficulties.