Dealing With Tax Debt Through A Consumer Proposal or Bankruptcy
For a number of reasons Canadians can end up owing the government money. The most common government debt is for income taxes. The government has significant collection powers that enable them to pursue tax debtors and seize money. They know where you are and how to get to your money, so treat this debt seriously.
Settlement with Canada Revenue Agency: It is possible to make monthly payment arrangements with CRA if you cannot pay the balance owed in full. Contact your local tax office to discuss the potential of this. For your local tax office location, check the CRA – Tax Services Offices website.
It may be possible to have the penalties and/or interest forgiven pursuant to the “fairness provisions” under tax legislation. There are a number of fairly tough criteria required to qualify for these arrangements, which are set out at the CRA – Tax Relief Provisions website.
We understand that the Government cannot reduce the original tax debt. The only option to deal with this portion of your debt, other than bankruptcy, is a Proposal.
Consumer Proposal and Tax Debt
In a Proposal filed by a consumer, all unsecured creditors – including current income tax debts – are offered the same arrangement. That arrangement must be better than what would be available in bankruptcy. CRA will often require some specific terms that will require the debtor to file tax returns and pay future tax obligations on time. As a Proposal is a legal process, you must contact a licensed trustee to file a Proposal. After the completion of the proposal period it is possible to start building your credit history again and you can check your credit rating after a certain amount of time is passed and also a good credit history is maintained.
Often a tax debtor has other debts as well. If you owe taxes, you need to consider all options before deciding what to do. You need to get help to ensure that you are solving your entire problem.