Ask A Trustee: Bankruptcy and Taxes

March 8, 2017 10:17 am Published by Leave your thoughts


bankruptcy taxes

 Doing your taxes during, and after bankruptcy can be a confusing process. Check out the correspondence below for advice from Colleen!



Hello Colleen:

Ronald, a former bankruptcy client of yours, has been a business colleague and friend of mine for 11 years.

At his advice and encouragement, I declared bankruptcy in Feb 2015 and should have finished at the end of November 2016, but due to an oversight on my part, I still have to pay down money owing, although I am no longer required to submit monthly reports.

Ronald does my YE Tax return, and I discussed this with him today, including that a pre-bankruptcy & post-bankruptcy tax refund for YE2015 were taken by my bankruptcy trustees. The letter from my trustees said: “Please note that if there is a tax refund for any of the above, the monies vest in the trustee and will be sent to the trustee.”

David asked me why the refund was not used to pay down, or be paid towards, money I owed on my monthly reports, and I said I hadn’t questioned if that was correct procedure or not. I was totally shocked when I received the letter as I had diligently paid more tax installments than I knew I needed all the way through, thinking I was creating a base for my savings account.

I again have a refund due to me for YE 2016, but when Ronald tried to file online, he was denied access to CRA with a message saying the bankruptcy trustee had to file my taxes. That further shocked me as I had specifically asked my trustee how I should handle year-end and was told it was now my responsibility to do my own year end taxes. So I am confused. Ronald questioned whether this refund will be used to offset the money I still owe, or once again be taken by the trustee, or refunded directly to me.

Ronald suggested I contact you before going to my trustee, to get an opinion from you in this matter. He holds your advice and professionalism in very high regard. So the purpose of my email to you Colleen, is to purchase an hour of your time in order to get some clarity in this matter in order to know how to proceed.

I [sic] would be happy to come down to your office at your convenience. I would be most grateful if you would be willing to guide me in this, unless of course, this presents a conflict of interest in your professional role.

I look forward to hearing from you.



 Colleen Craig wrote:

Hi Gretchen

I am happy to answer your questions in person or via email, but to save you some money and some time (hopefully), I will start with email.

The 2015 Refund is an “asset” of the estate and vests with the trustee.  Pre and Post.

The “surplus income” or monthly report payments that you have to make are separate assets of the estate and thus one cannot offset the other.

The 2016 return cannot be E-filed (just a CRA thing) but needs to be filed by you – paper filed – and the refund should belong to you in that is no longer is an asset of the estate.  If can be used by you, is you wish, to pay down what you owe to the trustee for the surplus income.

I think that answers all your questions.  Please let me know if something is not clear.

Gretchen wrote:

You are indeed as wonderful as Ronald said! I appreciate your time and comments very much, and you have answered my questions.

Thank you, Colleen!




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*names have been changed to protect our clients privacy


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