Many people believe that a person can go bankrupt, and all their debts will disappear..this is simply not necessarily the case, especially if you owe significant tax debts, without any regard for the tax system..
In the bankruptcy of Gordon Charles McRudden [McRudden (Re) 2014 BCSC 217] the Bankrupt owed upwards of $900,000 to the Canada Revenue Agency, and more then 1.1 million dollars overall…
The bankrupt was involved in litigation from a patient who claimed he assaulted. He was sued, and rang up hundreds of thousands of dollars in litigation. Further, he then had GST and Income Tax deductions which he didn’t pay. In 2007, he disposed of his assets, and transferred 600 thousand to his sister. In 2008 he went bankrupt.
He lives in a home assessed at 3 million, and paid no tax or rent, his sister pays him $2,000.00 a month no tax. He also had child support arrears of 300,000.
The CRA objected. This was a first time bankruptcy.
The Trustee asked for a conditional discharge of full repay of taxes, or a refusal. The bankrupt asked for a full discharge.
The registrar reviewed everything, reviewed case law. He stated that not paying tax debt not honest or unfortunate, and that deterrence is the overriding consideration.
He ordered that surplus payments from Feb 1 2007 – Dec 31, 2008 to be paid. He had to pay the estate $69,500.00, supply income and expense statements, and to pay any further income tax and excise tax payments that were left.