[StewB]

My wife had a sole proprietorship business in Ontario, Canada. She got behind in paying her Ontario Sales Tax remittance and the provincial government attached a lien on our jointly owned house to recover the outstanding moneys owed. She has since declared personal bankruptcy as the business failed. My question is if we sell the house, how much of the equity does the government have a claim to? Can they claim my 50% of that equity to settle the lien.

[Iknowalotofstuff]

It depends on the nature of the lien. A "super priority" lien survives bankruptcy because it is a charge against title like a mortgage. A judgment lien does not. The outstanding sales tax remittance is a debt provable in bankruptcy.

You might want to find out what the actual equity in the property is now. The tax debt will continue to accrue interest. As the equity in the property grows due to appreciation and mortgage reduction, the share that will to to the RST people also grows.

If the equity in the property is nominal, you might wish to purchase your wife's interest in the property for her share of that equity and get the lien off the property.

Here is an example of an alternative plan. If the home has a value of $250000.00 and a mortgage of $220000.00. The gross equity is $30000.00. The cost of sale is about 10% so the net equity is $27000.00. See if you can offer the government the $13500.00 being her share of the equity in satisfaction of the lien. You then have the choice of deciding if you want to sell or stay.

[AK lawyer]

... A "super priority" lien survives bankruptcy because it is a charge against title like a mortgage. A judgment lien does not. ...

I know very little about Canadian lien law, so I got to ask: If a judgment lien isn't a charge against title, what good is it?

[Iknowalotofstuff]

Here is the difference:
A civil judgment can be enforced by filing a Writ of Seizure and Sale with the Court. If the property is sold, the judgment has to be satisfied provided there is sufficient equity.

A statutory lien under the Retail Tax legislation allows the government to place a charge on title like a mortgage.

If you go bankrupt on the underlying civil debt that the Wirt of Seizure and Sale is based on, the writ becomes unenforceable. Upon receipt of the discharge, the creditor must withdraw the writ.

Example:
A student loan debtor was sued by a student loan creditor for a $10000.00 student loan. They obtained judgment and filed a Writ of Seizure and Sale on her real property. She went bankrupt and the student loan was discharged in the bankruptcy. The Writ arising from the student loan judgment is no longer enforceable.

By contrast, if the debtor goes bankrupt on the retail sales tax debt, the statutory lien like a mortgage is security for the sales tax debt. When the property is eventually sold the debtor's equity is subject to lien and sent to retail sales tax. The remaining stales tax debt would be discharged.