I am considering bankruptcy. I understand that in the year you declare bankruptcy you have to do two separate tax returns, one prior to declaration and one after. Will I be able to keep any funds returned to me for the 2002 tax year? And, when would I file the other two tax returns? Next year? If I have funds returned to me for the 2003 year (the year I declare bankruptcy) will those funds need to be turned over to my trustee - even though I will have been discharged by then?

For someone filing bankruptcy in 2003 the Trustee is obligated to either file, or confirm the filing of, the previous year tax return (2002) as well as the pre-bankruptcy return (January 1st, 2003 to date of bankruptcy) and the post bankruptcy return (date of bankruptcy to December 31, 2003.) Unless the bankrupt has already received the 2002 year refund, all refunds become an asset of the bankruptcy estate. Even if you are discharged before the end of 2003 the post tax refund would still belong to the estate and would be forwarded to the Trustee.

Ann Clarke
phone: (403) 296-2972
aclarke@moneyhelp.ca