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QUESTION:
My husband & I filed Bankruptcy in 2003. The Bankrupcy trustee filed a =
pre-return in 2002 and kept the $1100 return.=20
I have been discharged, my husband has a Conditional Discharge with =
$1500 owing. It turns out I am qualified for a Disability Tax Credit =
Back dated back until 1998. Our refund for 2003 is $5200, and the =
Bankrupcy Trustee says they will take it all.=20
Can they take the Disability Tax Credit for 1998 to 2001?
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=
=3D=3D=3D=3D=3D=3D=3D
david ingram replies:
The answer is yes. The trustee owns the refund and is honour bound to =
distribute it on a pro-rated basis to your creditors.
I was put into Receivorship in 2002 by the CRA.
You may find the following story interesting. A shortened version was =
published in Western Investor last month. I have now had at least 100 =
phone calls wanting to know what lawyer to use and wanting the name of a =
trustee.
BANKRUPTCY =96 or How I Found Freedom in an Unfree World
=20
I have just received my discharge from bankruptcy. It isn=92t =
completely over. I have to pay $800 a month for 36 months starting on =
Feb 7th, but that is a lot better than the $4,853,000 income tax bill =
that started it with no assets.
=20
Well there =93were=94 family assets. But over a period of 21 years I =
went from a positive =93paper=94 net worth of $4,800,000 to a negative =
$4,800,000 because of an income tax bill that I fought in court and lost =
and then got stubborn.
=20
If I had to do it again, I would have walked into a bankruptcy =
trustee=92s office 15 years ago and would have been able to get on with =
my life. Instead I got stubborn and decided I would go to my grave =
owing the CCRA as much as the tax bill increased to before I died.=20
=20
So the house was in my wife=92s name, the cars were in my wife=92s name, =
the motorhome was in my wife=92s name and the business was in my =
wife=92s name. I owned nothing and was quite enjoying the position. =
After all, what else could anybody do? Well, there was one thing =
someone could do. In the middle of the bankruptcy my wife left (with =
all the assets) but that is another article.
=20
Thankfully, the CCRA finally gave up on collecting it and hired a =
trustee to put me into bankruptcy. I understand that I might be the =
first person that the CCRA put into receivership in Canada. No trustee =
I have talked to had ever handled a receivership where the CCRA had put =
an individual into bankruptcy. Oh sure, there were thousands where a =
taxpayer had declared bankruptcy because of a tax bill. But no one =
knows of an individual out into bankruptcy by the CCRA.
=20
Now you have to know that I have sent a couple of hundred people to go =
bankrupt over the years. Their situation was hopeless and bankruptcy =
was the only solution. And I had even had an appointment to see a =
bankruptcy trustee on July 22, 1999 but luckily, broke my arm and leg in =
a motorcycle accident the week before and never made the appointment. =
But I should have rescheduled and got on with my life three years =
earlier because it took the CCRA three more years to put me into =
bankruptcy and I could have done something with those three years. You =
see, this article is meant to encourage you to see a trustee and pull =
the plug if you are fighting a losing battle, particularly if the major =
creditor is the CCRA.=20
=20
If you have money problems for any reason that could include divorce, =
separation, unexpected tax penalty, leaky condo, company downsizing, =
illness, an accident or any combination of the above, you will need =
help.
That help may be as simple as taking an adult education course in family =
finances at your local high school. Most adult education courses =
include such a course and even though I taught them for years, it did =
not keep "me" out of that $5,000,000 bankruptcy after three of the above =
events occurred.
If you need more immediate help and you happen to live in Greater =
Vancouver, contact a credit counselor such as Margaret Johnson at =
SOLUTIONS CREDIT, 200-10351 150th Street in Surrey - 1-877-588-9491 or =
locally (604) 588-9491. www.creditsolutions.ca =
www.solutionscredit.com [email protected]
As her pamphlet suggests;=20
"Budgeting involves more than just arithmetic. It takes determination. =
People experiencing financial difficulties need objective, unbiased =
neutral information." =20
That statement applies to your finances when you have an income and bad =
spending habits. It does not cover the financial disasters that I seem =
to see on a daily basis. I am talking about the $186,000 income tax =
reassessment for something that happened five years ago. I am talking =
about the leaky condominium crisis where the debt is $100,000 and you =
would have to earn $190,000 and pay $90,000 income tax to have $100,000 =
left and that is not counting interest accruing while you are doing it.
In this case, you need to consult competent help that does NOT start =
with a bankruptcy trustee, a night school course, a credit counselor or =
an accountant.
Now, you need a lawyer and not "just" any lawyer. You need a Murray =
Morrison, who specializes in Bankruptcy law and will work for you and =
give you and your family the advice it needs to preserve any assets =
possible and tell you what you can do and cannot do.
BUT, why not save a couple of dollars and go directly to the trustee.
The simple fact is that the trustee does NOT work for you. When you =
sign that paper, the trustee that you searched out, the trustee that you =
found in the yellow pages, the trustee your banker, hairdresser, =
mechanic, best friend or worst enemy recommended is not working for =
"you". =20
The trustee is working for the creditors. Their job is to get the most =
for the creditors following local federal, state or provincial =
guidelines that have different limits in each province and each state.
To access all these limits click on the best site I know of: =
http://www.bankruptcycanada.com
=20
British Columbia for instance is:=20
a.. Equity in a home in Greater Vancouver and Victoria =3D $ 12,000. =
In the rest of the province =3D $ 9,000;=20
b.. Equity in Household items =3D $ 4,000;=20
c.. Equity in a Vehicle =3D $ 5,000; The vehicle exemption drops =
to $2,000 if the debtor is behind on child care payments (to facilitate =
the enforcement of Maintenance Orders)=20
d.. Equity in work tools =3D $ 10,000;=20
Equity in essential clothing and medical aids is unlimited
=20
Alberta shows its agrarian roots with much larger exemptions as follows:
a.. Food required by the debtor and his/her dependants during the =
next 12 months;=20
b.. Necessary clothing of the debtor and his/her dependants up to a =
value of $4,000;=20
c.. Household furniture and appliances up to a value of $4,000;=20
d.. One motor vehicle not exceeding a value of $5000.00;=20
e.. Medical and dental aids required by the debtor and his/her =
dependants;=20
f.. Where the debtor is a bona fide farmer and whose principal source =
of livelihood is farming 160 acres if the debtor's principal =
residence is located on that 160 acres and that the 160 acres is part =
of the debtor's farm;=20
g.. The equity in the debtor's principal residence, including a mobile =
home, up to a value of $40,000.00;=20
h.. If the debtor is a co-owner of the residence, the amount of the =
exemption is reduced to an amount that is proportionate to the debtor's =
ownership interest;=20
i.. Personal property (i.e. tools, equipment, books) required by the =
debtor to earn income from the debtor's occupation up to a value of =
$10,000;=20
j.. Where the debtor's primary income is from farming operations, =
personal property required by the debtor for the proper and efficient =
conduct of the debtor's farming operations for the next 12 months.=20
=20
Saskatchewan Exemptions and agrarian routes are even more generous:
For Non-Farmers:=20
a.. Household furniture and personal effects to a value of $4,500 per =
person;=20
a.. Tools of the trade to a value of $4,500;=20
a.. A motor vehicle, if required for employment;=20
a.. $32,000 equity in your home ($64,000 if jointly owned);=20
a.. Certain life insurance policies;=20
a.. RRSPs, RRIFs and DPSPs are exempt from seizure (effective March 4, =
2003);
a.. Certain pensions.=20
For Farmers:=20
a.. Furniture, furnishings and appliances to a value of $10,000;=20
a.. The cash equivalent of produce sufficient to provide food and fuel =
for heating until the next harvest;=20
a.. All livestock, farm machinery and equipment, including one car or =
truck, necessary for the next twelve months operations;=20
a.. One motor vehicle, if required for business or profession, but not =
in addition to the one above;=20
a.. Tools and equipment to a value of $4,500 used by a farmer in his =
trade or profession;=20
a.. Equity in personal residence to a value of $32,000 ($64,000 if =
jointly owned);=20
a.. Seed grain equal to two bushels per acre of land under =
cultivation;=20
a.. RRSPs, RRIFs and DPSPs are exempt from seizure (effective March 4, =
2003);=20
a.. Cash equivalent of crop equal to:=20
a.. unpaid harvesting costs;=20
b.. living expenses to next harvest;=20
necessary costs of farming until next harvest.=20
a.. The homestead;=20
a.. Certain life insurance policies;=20
a.. Certain pensions=20
MANITOBA Exemptions are a little light:
Furniture, household furnishings and appliances not exceeding total =
value of $4,500;=20
a.. Necessary and ordinary clothing of the debtor and family;=20
a.. Food and fuel necessary to family for period of six months or =
cash equivalent;=20
a.. If debtor is a farmer:=20
a.. animals necessary for farming operation for 12 months;=20
a.. farm machinery, dairy utensils and farm equipment necessary for =
ensuing 12 months;=20
a.. one motor vehicle if required for purposes of agricultural =
operations.=20
a.. Home quarter.=20
a.. Tools, implements, professional books and other necessaries not =
exceeding a total value of $7,500 used in practice of trade, occupation =
or profession;=20
a.. One motor vehicle, if necessary for work or transportation to and =
from work, not exceeding $3,000 in value;=20
a.. Articles and furniture necessary to performance of religious =
services;=20
a.. Seed sufficient to seed all land of debtor under cultivation;=20
a.. Health aids, including wheelchair, air conditioner, elevator, =
hearing aid, eye glasses, prosthetic or orthopaedic equipment, necessary =
to debtor or family;=20
a.. Chattel property of municipalities and schools;=20
a.. Actual residence of the bankrupt, equity of $1,500 each if in =
joint tenancy, or $2,500 if not in joint tenancy.=20
If you are in BC, Bankruptcy lawyer Murray Morrison is in the same =
office as Solutions Credit that is just behind the Guilford Shopping =
Centre at:
Murray Morrison
200-10351 150th Street
Surrey, BC, CANADA, V3R 4B1
(604) 930-9013 Fax (604) 588-2005
email to [email protected] www.morrocolaw.ca
Talk to someone like Murray first. Get your law straight. Learn what =
you get to keep and what the limits are. In BC for instance you can =
have $5,000 equity in a car. However, The Bank of Nova Scotia (for one) =
will insist on seizing your car even if you have never missed a payment =
if the car loan is with them. Arranging for someone else to take over =
the loan before you go bankrupt could make the transition easier.
=20
Other assets you can keep (for a total of $32,000 if they all exist are: =
I advised one lady client to go bankrupt at this time last year for a =
$140,000 tax bill (which was unjust, unfair and illegal in my opinion) =
that we had fought for two years. (Canada decided to tax her =
retroactively on her income for five years even though she was an =
American living in the states. They decided she spent too much time in =
Canada and she had since moved to Canada officially - Bankruptcy was the =
only way to get rid of it and start over.)
I was blindsided by the Bank of Nova Scotia's new policy of not allowing =
anyone to keep a car. Luckily, a friend paid out the bank and loaned =
her the money and she kept her car. It would have been far easier if we =
had known that in advance. Her Bankruptcy Trustee was blind sided as =
well. It was also the first one he had seen.=20
After you have made a decision, you need a trustee. Remember, they are =
all working for your creditors. =20
He was not my trustee but Gerry Foran at Sands and Associates is a =
decent guy you can deal with. I recommend him once a week at least. =20
Gerry Foran
E Sands & Associates Inc
1100 Melville Street
Vancouver, BC, Canada V6E 4A6
(604) 684-3030
Sands and Associates also have satellite offices in Surrey, Burnaby and =
Langley.
Trustees might not like me saying this but you do not even need money to =
go bankrupt. The trustee can be paid from your assets, tax refund or =
might not even get paid until after the bankruptcy. While I was =
actually writing this, another client who I had sent to go bankrupt came =
in to return some material I had loaned him. I said thank you and =
suggested that he must have his discharge by now. He did not have it. =
He only had a conditional discharge because he still owes the trustee =
$1,500 which he expects to have very soon. Another client is in the =
same position. However, they do not have a dozen creditors phoning =
looking for money.
Hope this helps. Remember - see the lawyer first - before you see the =
trustee. And only talk to a lawyer who deals regularly with bankruptcy =
and appears in court for bankrupts protecting their rights. That means =
one in 100 lawyers. There is little chance that a lawyer you are =
already dealing with would be the one you would use because a bankruptcy =
lawyer is likely too busy to do anything else.
david ingram [email protected] www.centa.com
=20
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