LCTaylor Licensed Insolvency Trustees

All debt is stressful, but most people would agree that owing money to the Canada Revenue Agency (CRA) is a frightening prospect. CRA debt is never ignored or written off. Collection attempts by CRA are often aggressive and can even include wage garnishment and liens on your home.

If you are struggling with back taxes, don’t panic. There are resources in place that can help you get caught up on your taxes. Here’s what you need to know about dealing with CRA debt.

Request a payment plan.

While CRA will not negotiate with you on back taxes, they will work with you to split the amount you owe into more manageable payments. Contact CRA and ask them if you can go on a payment plan. This will allow you to pay the full amount back over a certain period of time.

There are a few drawbacks to a payment plan. Until the balance is paid off, it will accrue interest. Depending on how much you owe, this can be very expensive. Also, if you default on your payment plan, the CRA will begin collection attempts. This can include wage garnishment or a lien on your home.

Consult with a Licensed Insolvency Trustee.

Let’s say you discuss a payment plan with the CRA, but the payments are too expensive. Or, you’ve recently lost your job and cannot afford to make any payments. If this is the case, you may need to visit a Licensed Insolvency Trustee.

One option to discuss with the Trustee is a Consumer Proposal. This allows you to settle your debts for less than you owe. The Trustee will work with the CRA and your other creditors to negotiate a settlement on your behalf. Then, you’ll make a payment you can afford to the Trustee. This kind of settlement has advantages over one that you could arrange yourself. When you file a formal Consumer Proposal through a Licensed Insolvency Trustee, the proposal is binding on your creditors, and they are prevented from pursuing any further collection practices.

If a payment plan or Consumer Proposal fail, Bankruptcy is another option. Because tax debt is an unsecured debt, it is included in debts to be discharged in a bankruptcy. Depending on your circumstances, a Bankruptcy is sometimes a better option than a Consumer Proposal, because it may cost less and be completed sooner. A Trustee will help you decide the best option for your situation.

Both a Consumer Proposal and Bankruptcy stop collection activity from your creditors.

Above all—act quickly.

When it comes to CRA debt, it’s important to act quickly. Although it’s easy to ignore a notice or call from CRA, especially if you don’t have the money to pay your taxes, it’s the worst thing you can do. CRA will sometimes work with you, but only if you communicate with them.

CRA debt can be stressful, but it can be manageable if you follow these guidelines.

L.C. Taylor
www.lctaylor.com