Bankruptcy and Child Tax Credits

Question: If you file for bankruptcy do you lose the monthly child tax credit for your children?

Child Tax Benefit and Bankruptcy

The federal child tax benefit in Canada (CCTB) is a tax-free monthly payment paid to eligible families to help them with the cost of raising children under age 18. If you are currently eligible to receive child tax benefits, you will continue to receive them after you file for personal bankruptcy.

There are ways however that bankruptcy will affect your Child Tax Benefit:

Tax Returns: Eligibility for the Child Tax Benefit is based on family net income on your tax returns. You are required to file tax returns for the year of your bankruptcy, and for any prior years not yet filed. If you don’t give your trustee the necessary information in a timely manner, they won’t file your tax returns on time, and that could delay you receiving your child tax credit. So, to ensure that you continue to receive your CCTB while bankrupt, provide all requested information to your trustee so that they can file your tax returns on time.

Surplus Income: While you are bankrupt you are required to make a payment, called surplus income, based on your family income, which includes child tax benefits. It is possible that if you are a high income earner, your payment in a bankruptcy will be slightly higher because you receive child tax benefits.

For full information, and to determine the impact on your exact situation, please contact a licensed bankruptcy trustee.

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