Should I File Bankruptcy for Tax Debts? - Manitoba Bankruptcy
Tax Debts in Bankruptcy
Contrary to popular belief, Taxation Debt accumulated such as Income Tax, General Sales Tax (GST) and Harmonized Sales Tax (HST) to name a few, are given the same treatment as that provided to debt accumulated through Credit Cards, Bank Loans and other unsecured loans.
Similar to how debts accumulated by devices that are mentioned above, Tax Debt is also forgone when Individuals in Manitoba file for Personal bankruptcy or Consumer Proposals.
If you owe a fair bit of Tax Debt, the odds are something went wrong somewhere along the road, in this scenario your best bet is to have an inexpensive way to clear out your debt.
The best two ways for that remain to be either:
Short of that, it is unlikely that you will become scot-free of the debt without any hassle.
But what option do you have and is Bankruptcy the way forward for you?
Canadian Revenue Agency Policies
The Canadian Revenue Agency (CRA) has custom tailored policies for different scenarios, an example is how someone who has never filed taxes would be you wouldn’t be treated as nicely as say someone who has been filing taxes annually for the last decade, for whom it is fair to assume that they will be subjected to a “less harsh” treatment by the CRA.
The Real Question that stems from considering if you should file for Bankruptcy to erase Tax Debt is how this Tax Debt came about as a result.
Meeting with your Bankruptcy Trustee to evaluate the factors that resulted in this Tax Debt is essential, after which your Trustee will inform you of your available avenues for tackling the debt and the recommended course of action.
What if I don’t want to file for Bankruptcy?
The CRA does not in any form negotiate or settle the debt that it is owed, you are free to try and strike up a conversation in the hopes of reducing the amount owed, but it will prove simply futile, this is due to the CRA simply not being willing to engage in any form of Negotiations.
That does not mean you do not have alternative options in the case of you not wanting to file for Bankruptcy.
You can apply to the Fairness Commission of the CRA to have the penalties and interest on your debt reduced.
This will not in any way reduce the debt owed to the CRA, but it may reduce the penalties and interest if you have a sufficiently valid reason as to why the debt wasn’t paid.
Tax Court of Manitoba
You can object to a Tax Assessment and if your objection is unsuccessful, you are clear to file an appeal to the Tax Court of Manitoba.
You will need a Tax Lawyer and an Argument explaining how the application of the Tax Laws present within the Country are not applicable to your case in particular and you should be exempted.
If you win, your debt is reversed, but however if you lose; you will owe the Debt, the Penalties, the Interest alongside the now large Legal Bill you would have accumulated.
There exists only one sole Federal Government or Debt Settlement Program in Manitoba where you are able to clear your Tax Debt for an amount lower than that of the amount you owe.
And that is filing a Consumer Proposal.