Howard Hayes
In simple terms, creditors are not allowed to pursue money owing from prior to the date of the proposal.
If you don’t owe CRA anything, then yes, you keep your refund if you file a Consumer Proposal. Whereas in a bankruptcy, regardless of whether or not you owe CRA money, you’ll lose your tax refund.
This is often considered to be a good advantage to you to consider filing a Consumer Proposal rather than a bankruptcy, particularly if you normally receive a large tax refund.
If you currently owe money to CRA and you file a proposal, all taxes owing up to the end of the prior year are included in your proposal. If you file a proposal on March 24, 2010, all taxes owing up to the end of December 31, 2009 are included, since that’s the last period for which you will have filed your taxes. When you file your taxes for the 2010 year, you are required to pay whatever is owing.
If you get a refund for the 2010 tax year (which you wouldn’t file until early 2011), in theory CRA should send you the refund.
However, on occasion CRA could take the position that, since part of the refund is for the year of the proposal, they will take the refund and apply it against the previous balance owing.
So, it maybe best to assume that you won’t get your refund for last year (if there was a prior balance owing), and it may be possible that you’d not get your refund for this year. Or you may. CRA have not held a consistent position on the matter in the past.
If this is a concern of yours, feel free to call me on (519) 622 3773 or send me an email. We’re here to help you understand the implications of questions like this one and to give you the right information so you can decide on the best options available to deal with your debts.
About Howard HayesHoward has worked in our Cambridge office for many years helping Cambridge residents find solutions for debt problems. As an Estate Manager Howard is able to explain all your options and find a solution that works for you.
