Many of the people I meet with in our London Ontario office have heard that if they file bankruptcy, they will lose their tax refund. At this time of year especially, this can be stressful because many of us count on our tax refunds to get caught up on bills, complete car repairs, buy our kids summer clothes, etc. Unfortunately, if you file bankruptcy, it’s true. You will lose a tax refund. In fact, depending on when you file, you could lose more than one. (For example if you file bankruptcy on April 1, and haven’t done your taxes yet, you will lose your refund this year AND next year.)
If, however, you file a consumer proposal, you get to keep your tax refund. So, if you generally get a good sized return each year, it may make sense to look at a proposal as an alternative to bankruptcy.
Speaking of taxes, one thing that we will explain to you when you meet with us, is the continued importance of filing taxes. If you are in a consumer proposal and don’t file your taxes, this can actually interfere with the proposal itself.
Another point to consider is this: income taxes are debts that are included in a consumer proposal. So, if you owe money to Canada Revenue, you should consider a proposal, as this can help you deal with that type of debt as well.