It is a common myth that you can’t include government debts in bankruptcy or consumer proposal. Individuals often assume that the government is exempt from the rules that govern other types of creditors. This is simply not the case.
While struggling to make payments to government debt, individuals often end up having little room in their budget for emergencies or unexpected expenses. Slowly, consumer debt increases and get out of control. When the overall debt load climbs, and becomes difficult to pay then it is time to consider meeting with a licensed professional to discuss your options.
You can include debt owing to the government in both a bankruptcy and a consumer proposal. Government debt is not restricted to debt owing for your personal income tax return. You should consider these options if you have debt problems that include the following:
- Amounts owing for GST remittances;
- Personal income tax debt;
- Amounts owing for payroll or other source deductions;
- Amounts owing to the Canada Mortgage and Housing Corporation for the shortfall on the sale of a property.
- Amounts owing for reassessments of your personal income tax return due to deductions that have not been accepted ie. Charitable donations, medical expenses etc.
This list is not exhaustive. If you have other government debt you should check with a trusted advisor to enquire if you can include that in a proposal or a bankruptcy filing. You may be surprised by the answer.
The important thing to remember is that with a few exceptions, government debt is treated the same way in a bankruptcy or a consumer proposal filing than any other regular consumer debt. When you receive your discharge from bankruptcy, or if you complete your consumer proposal payments, these debts are released, and so is your obligation to pay them.
If significant government debt is affecting your life, phone a licensed Trustee today and make an appointment for a free consultation.