Your Tax Obligations in Bankruptcy
If you declared bankruptcy, you are required to file two income tax returns for the year of the bankruptcy:
- one for the period from January 1 to the day preceding the date of the bankruptcy; and
- one for the period from the date of the bankruptcy to the end of the year.
Both returns must be filed by April 30 of the calendar year following the year of the bankruptcy. If you or your spouse carried on a business, you have until June 15 of that year to file the returns.
Use the personal income tax return (TP-1-V). Be sure to enter the date of the bankruptcy and the period covered by the return (before or after the bankruptcy) on line 21.
Proposal to creditors
Before declaring bankruptcy or during the process, you can make a payment proposal to your creditors to lower your payments or extend the payment deadlines. You can make one of the following proposals:
- a proposal in bankruptcy (regardless of the amount of your debt);
- a consumer proposal (if the amount of your debt, excluding debts backed by a mortgage on your principal residence, is less than $250,000).
If one of these proposals is accepted and you comply with its terms, you are not considered to have declared bankruptcy. As a result, you must file only one income tax return by April 30 of the calendar year following the year in which you made your proposal.