Can’t stay in business

If your tax bill has grown so large that, even with cancellation of accrued interest and penalties, you have no ability to pay it down in 24 months, or even at the outset 30 months, you need to explore the options available under the Bankruptcy and Insolvency Act. DioGuardi reviews your financial situation in detail to determine if this ultimate step is your only option of retiring your tax balances. If we believe this is necessary, we will arrange a confidential meeting with a trustee to map out the facts and impact of such a proceeding on your business and your personal financial life.  If you choose to proceed, we will then release you to the trustee.


There are two options under the BIA:
A Consumer Proposal allows you to propose to repay your creditors – which would include the CRA and/or the provincial tax authorities – a maximum sum of money on a monthly basis for up to 60 months. Your maximum sum must be more than the creditors would receive in a bankruptcy. And you must be able to demonstrate that you can meet that monthly payment without fail. If your creditors do not accept your proposal, and the total amount you owe is in excess of $250,000, you have no option but to pursue bankruptcy. A consumer proposal is prepared by a trustee, who presents it to your creditors on your behalf.

Bankruptcy is a legal declaration that you are insolvent. You work with a trustee to determine to the liquidation value of your assets, which are turned over to the trustee to sell in order realize that money and use it to pay off your creditors. You are required to fulfill certain requirements by the trustee, and 50% any income you earn in excess of the provincial minimums must be paid to the trustee for distribution to your creditors. This will continue for as long as it takes before you are discharged from your bankruptcy.

Here are the most important facts to understand about bankruptcy:

1.There is no free ride. You will be required to pay some amounts to your creditors, and any assets of value will likely be liquidated by the trustee.

2.A Bankruptcy involves ALL your debts, not just your tax debt.

3.If the equity in your home is low – typically 25% or less  – you will not lose your home. If only one spouse in a matrimonial home ownership is declaring bankruptcy, only 50% of the home equity will be calculated in the valuation of your assets. Your spouse will have the opportunity to buy out your share of the equity at fair market value.

4.If you are a sole proprietor, bankrupting your business is achieved through your personal bankruptcy.

5.Tax balances for trust monies – source deductions, GST/HST, PST, EHT, EI and CPP – will be assessed personally to the Directors of a corporation should the business go bankrupt or be deemed in danger of bankruptcy. These balances can then only be discharged through the director’s personal bankruptcy. The tax authorities will rigorously pursue collection of these tax balances, and may oppose your bankruptcy discharge, extending the time in which you must continue to pay your surplus income to the trustee for months or even years.

6.There is a mandatory period during which you remain a bankrupt until you are discharged and then fully clear of your debts. Any violation of the terms of your bankruptcy will extend the time before you are discharged, or may invalidate the bankruptcy – which permits your creditors to pursue you anew.

7.While you are a bankrupt, you cannot hold office as a Director of a corporation.