The short answer is yes!
Debts owing to the Canada Revenue Agency (CRA), including income tax, GST or source deductions, can be discharged by bankruptcy or released on completion of a consumer proposal for any amounts owing up to the date of filing. Upon filing, any garnishments (requirements to pay) issued by CRA will be stayed.
If you continue to be self-employed during the bankruptcy or consumer proposal proceedings, you may be required to pay quarterly installment payments. It will be important to keep current with your post-filing obligations (filing and paying) to show good faith.
If you owe more than $200,000 of personal income tax debt and this amount represents 75% or more of your total proven unsecured claims in bankruptcy, you will not be eligible for an automatic discharge and a court application will be set by the Licensed Insolvency Trustee. The timing on when the court application happens will be dependent on whether you are a first-time bankruptcy, and whether you have surplus income.
In some cases, CRA may have taken steps prior to the date of bankruptcy or consumer proposal to secure the debt against your assets, such as real estate or personal property. A Licensed Insolvency Trustee will be able to review these transactions with you.
We recommend that you speak to a Licensed Insolvency Trustee to find out more.