Section 172.1 — Bankruptcy and Insolvency Act: Exception — personal income tax debtors

In the case of a bankrupt who has $200,000 or more of personal income tax debt and whose personal income tax debt represents 75% or more of the bankrupt’s total unsecured proven claims, the hearing of an application for a discharge may not be held before the expiry of if the bankrupt has never before been bankrupt under the laws of Canada or of any prescribed jurisdiction, 9 months after the date of bankruptcy if the bankrupt has not been required to make payments under section 68 to the estate of the bankrupt at any time during those 9 months, or 21 months after the date of bankruptcy, in any other case; if the bankrupt has been a bankrupt one time before under the laws of Canada or of any prescribed jurisdiction, 24 months after the date of bankruptcy if the bankrupt has not been required to make payments under section 68 to the estate of the bankrupt at any time during those 24 months, or 36 months after the date of bankruptcy, in any other case;

and in the case of any other bankrupt, 36 months after the date of the bankruptcy. Before proceeding to the trustee’s discharge and before the first day that the hearing could be held in respect of a bankrupt referred to in subsection (1), the trustee must, on five days notice to the bankrupt, apply to the court for an appointment for a hearing of the application for the bankrupt’s discharge. On the hearing of an application for a discharge referred to in subsection (1), the court shall, subject to subsection (4), refuse the discharge; suspend the discharge for any period that the court thinks proper; or require the bankrupt, as a condition of his or her discharge, to perform any acts, pay any moneys, consent to any judgments or comply with any other terms that the court may direct. In making a decision in respect of the application, the court must take into account the circumstances of the bankrupt at the time the personal income tax debt was incurred; the efforts, if any, made by the bankrupt to pay the personal income tax debt; whether the bankrupt made payments in respect of other debts while failing to make reasonable efforts to pay the personal income tax debt; and the bankrupt’s financial prospects for the future. If the court makes an order suspending the discharge, the court shall, in the order, require the bankrupt to file income and expense statements with the trustee each month and to file all returns of income required by law to be filed. If, at any time after the expiry of one year after the day on which any order is made under this section, the bankrupt satisfies the court that there is no reasonable probability that he or she will be in a position to comply with the terms of the order, the court may modify the terms of the order or of any substituted order, in any manner and on any conditions that it thinks fit. The powers of suspending and of attaching conditions to the discharge of a bankrupt may be exercised concurrently. For the purpose of this section, personal income tax debt means the amount payable, within the meaning of subsection 223(1) of the Income Tax Act without reference to paragraphs (b) to (c), by an individual and the amount payable by an individual under any provincial legislation that imposes a tax similar in nature to the income tax imposed on individuals under the Income Tax Act , including, for greater certainty, the amount of any interest, penalties or fines imposed under the Income Tax Act or the provincial legislation. It does not include an amount payable by the individual if the individual is or was a director of a corporation and the amount relates to an obligation of the corporation for which the director is liable in their capacity as director.