My name is Adam Rauf and I’m the associate who manages the Guelph office for Hoyes, Michalos and Associates Inc. and I’m currently in the process of becoming a licensed Trustee In Bankruptcy.
Without a doubt, a Consumer Proposal is always the most favoured alternative to filing a bankruptcy. Unfortunately, it may not always be financially possible depending on your income.
With the current rules, when you file an assignment in bankruptcy, you’re assigning control of your assets to a trustee for the benefit of your creditors. These assets also include your tax refunds for the year you file.
If you currently owe money to the government, it’s likely you would not be receiving any tax refunds, but for those of you that are expecting a tax refund it can sometimes be an important consideration to think about in regards to the timing of filing a personal bankruptcy.
Without trying to be to too technical, if you file a personal bankruptcy close to the end of the year, you’ll most likely have to pay for the Ontario Health Premium Tax. Essentially when someone declares bankruptcy we have to split up the year into two tax returns (Jan 1 – date of bankruptcy) and then the second return (date of bankruptcy – Dec 31). It’s on the latter return where the tax system is not very robust and you’ll have to end up paying anywhere from ($300 to $750) depending on your income.
What this means is that December could be a critical month to file a bankruptcy if it’s something you are contemplating rather than waiting until the new year. This is true of single parents with children that can be eligible for large refunds.
The best option to avoid this ugly mess is to consider filing a Consumer Proposal.
If bankruptcy is on your mind and you think you may be eligible to receive a tax refund, call me directly at 310-PLAN or e-mail me to discuss your options. It never hurts to have a face to face conversation and most people find the free consultation to be very helpful.
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