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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2667
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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Will My Canadian income tax debt become noncollectable in

Customer Question

Will My Canadian income tax debt become noncollectable in the US through Chapter 7?I’m seriously considering Chapter 7 bankruptcy in the US and currently qualify.In addition to my US debts, I have a sizable tax debt to Canada Revenue Agency. It is imperative that Chapter 7 make this debt noncollectable in the US.I understand that US bankruptcy rules have some specific conditions in regards ***** ***** taxes: need to know if these same conditions apply to Canadian income tax debts as my CRA returns were filed less than 2 years ago and were also assessed less than 240 days ago.I qualify for Chapter 7 now and I’d rather do it now and get it over with than wait for the above two timelines to become effective.Canada and the US have a tax treaty that includes co-operation with collections, hence my concern. Thank you for your help.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  LEE HORNER replied 1 year ago.

I am a consumer bankruptcy attorney since 1985 and offer this as information only, not legal advice. When we've had this come up I have found that the Canadian taxes are not dischargeable in a US bankruptcy because for one thing we cannot get jurisdiction over the Canada tax agency.

Here's a thought -- do a 2 step deal if the math works -- file your Ch 7 & get rid of all dischargeable debts, be sure and list the Canada tax agency on this schedule even though the debt is not dischargeable. Once you have your 7 discharge, if you can pay the tax debt over 5 years, file what we call a Chapter 20 -- that is a chapter 13 following a 7. You will not get a 13 discharge but you get 60 months max to pay the tax debt. That might just work.

Good luck. If you like my answer I would appreciate your positive feedback -- after that any further questions are free to me.

Lee Horner Esq

Tucson, AZ

Customer: replied 1 year ago.
Hi Lee. Thanks for your response.It is my understanding that Canadian debts are not dischargeable in Canada by filing a US bankruptcy. That totally makes sense due to jurisdiction.Another bankruptcy lawyer recently advised that my unsecured Canadian credit card debt would not be discharged in Canada, but by filing Chapter 7 in the US, I could schedule and notice the Canadian financial institutions involved and after my discharge, the Canadian credit card debts would no longer be collectible WITHIN THE US. Does that sound correct to you too?This other bankruptcy lawyer was uncertain however as to how a Canadian income tax debt would be affected, since there are specific rules relating to tax debts here in the US: have no issue if the Canadian tax and credit card debts remain valid in Canada.What I want is to be completely certain that filing Chapter 7 will stop any further collection efforts by all Canadian creditors within the United States. Any input on this issue is appreciated. Thank you.

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