Question from reader in Waterloo Region: What happens to my GST credit if I file for bankruptcy? What about the new HST credit from the Ontario government?
Answer: The GST credit is a tax free payment made to families with modest incomes to help offset the cost of the GST. In addition to the GST credit that has existed for several years, the Ontario government will be making tax free payments under a plan called the Ontario Sales Tax Transition Benefit (OSTTB). The amount that you are eligible for is determined based on the information you file on your income tax returns. I won’t go into the details on the calculation of these different benefits. The Canada Revenue Agency website provides details on the GST credit. The Ontario Ministry of Revenue website provides details on the OSTTB.
The question that we have been receiving for a while now is whether or not the trustee will have to take the GST credit and/or OSTTB if someone files for bankruptcy protection.
The rules regarding the GST credit are well established. In limited situations, the trustee may have to take the GST credit.
Because the HST and the OSTTB are new, it has been less clear. Earlier this week, the Office of the Superintendent of Bankruptcy issued a position paper on this matter. You can read the details here, but I’ll give you the quick version now. Your trustee will not take your OSTTB if you file for bankruptcy. Further, the OSTTB will not be taken into account in calculating if you have surplus income.
Hope that makes some sense. If you have questions about GST, HST, OSTTB (or just the ABC’s) and how bankruptcy affects it, you can call me at 310-PLAN. We’ll spend some time discussing the problems you are facing, and explore the options to deal with your debts. You can also send me an e-mail with your questions.
