Child Tax Benefit

Do I lose my Child Tax Benefit If I File a Bankruptcy or Consumer Proposal?

This question has to be one of the most common questions we hear when meeting with people in our office. What happens to my Canada Child Benefit and Ontario Child Benefit if a file a Bankruptcy or Consumer Proposal? The short answer … it’s yours. In either a consumer proposal or a bankruptcy, these benefits are protected and they continue to be paid directly to you by the government. These benefits are intended to help you provide a home, food, clothing and other necessities for your children and they don’t get cut off when you are in financial trouble and need the money the most.

When you file a Bankruptcy you are required to report your income to the Trustee on a monthly basis.  Any Child Benefit payments you receive must be reported, but these amounts are not included in the calculation of what you have to pay to the Trustee.  In a consumer proposal, you don’t report your income monthly so you don’t even have to report these benefits to the Trustee after the proposal is filed.

It is important to note that if you or your spouse have not filed all tax returns, there will be a delay in benefit payment. You don’t lose the benefits, but CRA will withhold them until the returns are up to date.

If you file bankruptcy, the Trustee has to file your tax return for the year of bankruptcy. The year is split as of the date of bankruptcy and there are two returns to be filed – pre-bankruptcy and post-bankruptcy. Refunds for either return come to the Trustee, so sometimes people don’t feel so rushed to get their tax information to us since they don’t get the refund. Don’t make this mistake! The post-bankruptcy tax return has to be processed manually by CRA and it takes time. You want your return filed as soon as possible to get to the front of the line. Otherwise, Child Benefits, Trillium Benefits and other income dependent benefits may be delayed starting with the July 1 payment and there is nothing the Trustee can do to speed up processing by CRA.

If you are drowning in debt and trying to keep your family finances going, give us a call at 1-833-808-8463 to set up a free meeting. We have helped thousands of families and we will help you too!