Bankruptcy and the Disability Tax Credit - from ask an
This is a multi-part message in MIME format. ---------------------- multipart/alternative attachment 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 ---------------------- multipart/alternative attachment An HTML attachment was scrubbed... URL: http://www.centa.com/CEN-TAPEDE/centapede/attachments/f2c8d12c/attachment.htm ---------------------- multipart/alternative attachment--
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