PROTECTING YOUR ASSETS FROM CREDITORS – Part 2

Rule 1​​: High tax debts can often be greatly reduced through bankruptcy

Here are a few important facts to consider:1. A bankruptcy involves all your unsecured debts, not just your tax debt.2. If the equity in your home is low – typically 25% or less – likely you will not be required to sell the home. If only one spouse in a jointly owned home is declaring bankruptcy, only 50% of the home equity willnormally be calculated in the valuation of your assets. Your spouse, if he/she is not also insolvent, will have the opportunity to buy out your share of the equity in the house at fair market value.

Rule 2​: ​Take action before the CRA files a lien

Filing for bankruptcy, or filing a consumer proposal, does not discharge a CRA lien registered on the title to your home. After your discharge from bankruptcy, the lien remains on title and – what is even worse – accrues interest over time. The lien remains in force, until you eventually sell your home. At that point, the tax collector will be next in line after the holder of the first mortgage and is entitled to receive the remaining proceeds up until your share of the equity is exhausted. After that, because of your bankruptcy, your tax debt is extinguished – even if your equity is not enough to pay the tax in full. Having gone through a previous bankruptcy, some clients have told us that they were never advised of this problem by theinsolvency trustee they hired before signing up. After signing on with the trustee, they were stuck.

Rule 3​: ​You need to plan carefully

Sometimes a proposal or bankruptcy is a wise financial choice. But don’t put off planning sessions for later as there may be opportunities for substantial savings at the front end. DioGuardi Law lawyers will review the facts and engage in serious planning to determine the pros and cons of going forward with a proposal or a bankruptcy and map out what assets we believe can be safely preserved.

Take the situation of a marital dispute. Here a husband may be able to transfer assets, such as the matrimonial home, to his wife in satisfaction of claims she might have under the Family Law Act. Such a transaction is often protected from attack by the husband’s creditors. Because of lawyer/client confidentiality, you can speak to us in full confidence. Discussions with an insolvency trustee are not confidential and the information they obtain can be used against you. Caveat emptor (let the buyer beware) is the best policy when dealing, unrepresented by legal counsel,with an insolvency trustee.

Rule 4​​: You may qualify for a speedy discharge

Unless the discharge is opposed, bankrupts with a personal income tax debt of less than $200,000 are usually eligible for an automatic discharge nine months after the date of the bankruptcy. Bankrupts with a personal income tax debt of over $200,000 where the tax indebtedness is more than 75% or more of all unsecured, proven claims may not be so lucky.

A discharge hearing usually takes place nine months after the date of bankruptcy, if the bankrupt was not required to make surplus income payments, or 21 months after the date of bankruptcy if surplus income payments are being made.

If you were bankrupt before, the discharge hearing will normally not take place for 24 months after the date of bankruptcy unless there was a requirement to make surplus income payments or 36 months after date of bankruptcy, if the bankrupt was making surplus income payments.

Rule 5​​: It’s prudent to have legal counsel at the discharge hearing

At the discharge hearing, the judge can either refuse your discharge, suspend the discharge or require that you, the bankrupt, as a condition of being discharged, pay additional monies or comply with other terms as the court directs.

In reaching its decision, the court will consider a list of factors, including the circumstances of the bankrupt at the time a high personal income tax debt was incurred, the efforts, if any, made to pay the tax debt, whether the bankrupt made payments in respect of other debts, while failing to make reasonable efforts to pay the income tax debt, and the bankrupt’s financial prospects for the future.

The CRA is usually represented at such hearings if it believes that a conditional order should be imposed on the bankrupt.

If it can be shown that there is no reasonable probability of compliance with the order, a bankrupt can apply to the court one year after it is made asking it to review the order.

Rule 6​​: Fight to get the best deal

Handled properly, the insolvency process can give debtorsa needed leg up. The bankruptcy judge will often give tax debtors every opportunity to come forward with a reasonable plan to deal with a reduced portion of the tax debt over time and without interest. However, if you don’t even try, it’s hard to be a winner!

© The foregoing provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your own particular circumstances.

Brigitte DioGuardi

B.A., LL.B

Brigitte obtained her Law Degree from the University of Sheffield in the United Kingdom. Upon her return, she qualified for the Bar and was called to the Law Society of Ontario (formerly the Law Society of Upper Canada) in 2002. She was also a member of the Bar of British Columbia and headed up the Vancouver office of DioGuardi Tax Law.  Fluently bilingual in English and French, Brigitte has broad experience in the areas of:

  • Tax Law, Civil Assessment Negotiation and Litigation, Criminal Prosecution Defense, Unpayable Tax Debt Solutions, Audits, Tax Amnesty.
  • Corporate and Commercial Law
  • Real Estate
  • Wills and Estates
  • Insolvency and Bankruptcy

Tax Law

​If you are one of thousands of Canadians who have failed to file taxes for several years the answer maybe to seek amnesty. Be aware that failure to file for more than one year if you owe taxes is a criminal offence and you may be criminally prosecuted.

The CRA Voluntary Disclosure Program allows taxpayers to come forward and obtain immunity from prosecution and most civil penalties, provided certain conditions are met.

We specialize in lawyer-negotiated tax debt settlements and tax amnesties with federal and provincial tax authorities, offering taxpayers a much-needed resource for the resolution of situations that all too often put personal and financial lives at risk. We stand as your protector, defender, and advocate to ensure that you the taxpayer, receive the best treatment possible. 

We offer solutions for tax problems such as:

  • Unreported income
  • Unfiled tax returns
  • Payment arrangements
  • Unpayable tax debt
  • Tax dispute litigation
  • Criminal tax defense

Wills, Estates & Trusts

​We offer the following will, estate and trust services for individuals and business-owners:

  • Wills
  • Preparation of trust agreements
  • Powers of attorney
  • Estate administration
  • Probate
  • Representation in estate driven litigation
  • We currently offer a special time limited package for one will and two powers of attorney (property and personal care) for $295 plus HST

Real Estate

We can assist you with all your real estate needs including:

  • Drafting agreements
  • Purchases and Sales
  • Title transfers
  • Leases

Tax Debt Relief

With the coronavirus pandemic leaving many in a precarious and dire financial situation, it is essential that you protect yourself financially. If you have a large, unpayable tax bill, we can help. We act in the best interest of the tax debtor. Unlike us, insolvency trustees represent not only you but your creditors (ie- the tax collector). The more tax you pay, the more trustees earn. Our goal through leveraged negotiations, is to reduce your tax debt.

Please consult our blog post Protecting Your Assets from Creditors for more information.

Business & Tax Planning

If you do not already have a certified financial planner, we can provide one or more highly qualified people who can work closely with us to assist you with such matters as:

  • Resident and non-resident corporate restructuring
  • Optimum use of holding corporations
  • Continuity and succession planning
  • Tax-free transfers
  • Losses and ABIL planning
  • Making interest tax deductible
  • Small business planning

Corporate & Commercial Law

We have represented business clients for the last 50 plus years and have supported their legal requirements on an on-going basis by offering the following services:

  • Incorporations and corporate governance
  • Corporate reorganizations and transactions for the directors and shareholders
  • Negotiation and drafting of agreements, professional corporations, minute book maintenance

Brigitte DioGuardi

B.A., LL.B

Brigitte obtained her Law Degree from the University of Sheffield in the United Kingdom. Upon her return, she qualified for the Bar and was called to the Law Society of Ontario (formerly the Law Society of Upper Canada) in 2002. She was also a member of the Bar of British Columbia and headed up the Vancouver office of DioGuardi Tax Law.  Fluently bilingual in English and French, Brigitte has broad experience in the areas of:

  • Tax Law, Civil Assessment Negotiation and Litigation, Criminal Prosecution Defense, Unpayable Tax Debt Solutions, Audits, Tax Amnesty.
  • Corporate and Commercial Law
  • Real Estate
  • Wills and Estates
  • Insolvency and Bankruptcy

Joyce Bruno

EXECUTIVE LEGAL ASSISTANT

Joyce Bruno has worked as executive legal assistant to Paul Dioguardi for 35 years and continues to offer her expertise and experience to the Dioguardi Law firm. Joyce’s role has evolved over the years and has acquired and developed many skills. She is an invaluable asset in case management and ensures the smooth running of our office.

Paul DioGuardi

B.A., LL.B, Queen’s Counsel

Paul obtained his Law Degree from Queen’s University in 1964.  He is a member of the Bars of Ontario, British Columbia and the Turks and Caicos Islands, a British tax free territory in the West Indies. He has over 50 years of experience and was trained at the Ottawa head offices of Revenue Canada and the Tax Litigation Section at the Department of Justice. Paul has had and continues with an extensive career in various areas of law such as:

  • Tax Law, Civil Assessment Negotiation and Litigation, Criminal Prosecution Defense, Unpayable Tax Debt Solutions, Audits, Tax Amnesty.
  • Corporate and Commercial Law
  • Real Estate
  • Wills and Estates
  • Insolvency and Bankruptcy