The simple answer to this is yes. If you go bankrupt or make a proposal that is accepted by creditors, the tax debt is included in either process in normal cases.
When Can’t It Be Included?
Here are some of the unusual cases where further action or collection can be taken by CRA;
- If the amount you owe to CRA is large, or most of your debt to creditors is tax debt, CRA will consider objecting to your discharge if you go bankrupt. This means your discharge has to be considered by bankruptcy court. It is fairly common to see objections to discharge by CRA when the tax debt is over $100,000. But the decision by CRA on whether to object or not is on a case by case basis.
- CRA can obtain a judgement for tax debt from the federal court of Canada and if CRA registers this judgement on real estate that you own, their claim for tax against the land becomes secured just like a mortgage. A proposal or bankruptcy
does not get rid of this type of tax debt registered against land. If you file for a proposal or bankruptcy before CRA takes this step, then CRA will not register against your land.