A Canada Revenue Agency (CRA) requirement to pay is a serious matter and should never be ignored.

If you have received a requirement to pay, it means the CRA is about to take collection action. They are telling you that you are required to pay them.

If you don’t, CRA collections could follow, including:

• A wage garnishment;
• Frozen bank account;
• Property lien,
• And more.

If this happens, there will be no further warning to you.

You need to act before the CRA does and deal with the CRA requirement to pay as quickly as possible.

We’ve put together a step-by-step guide for how to go about it.

Step 1: Answer this question — can you pay the CRA to their satisfaction?

Do you have the funds available that the CRA is requiring you to pay?

While the CRA will sometimes offer a payment plan, they will be unlikely to accept an arrangement of more than 12 months. Take your debt and divide it by 12 — can you afford the monthly payment?

If the answer is yes, then proceed to pay.

If the answer is no, then proceed to step two.

Step 2: Assess your assets

Do you have sufficient equity in your assets that you could use to deal with the requirement to pay?

For example, do you have sufficient equity in your home to refinance your mortgage?

Or are you eligible for a debt consolidation loan that you can use to pay the CRA and then repay over a fixed schedule?

If the answer is yes, now is the time to use it. Refinancing your mortgage will be less expensive — and have less long-term consequences than ignoring the CRA.

If the answer is no, proceed to step three.

Step 3: File for a consumer proposal or bankruptcy

If you do not have the funds or sufficient equity in your assets, the only way to protect yourself from CRA collections is to file for a consumer proposal or bankruptcy.

In a consumer proposal, you make a settlement to your creditors for less than what you owe, but more than what they would receive if you filed for bankruptcy. The majority of your creditors must accept your proposal and you can only carry up to $250,000 in unsecured, non-mortgage debt.

If you have more than $250,000 in debt, or the majority of your creditors do not accept your proposal, then you might consider filing for bankruptcy instead. There is no limit to the amount of debt you can have when you file for a bankruptcy, and unlike a consumer proposal, you do not need your creditors’ acceptance. However, depending on how your bankruptcy is structured, you might have to give up some assets to pay off your debts.

Both filing for a consumer proposal and for bankruptcy will stop any CRA collections action — including a requirement to pay. While there are consequences to filing for insolvency, like a bruised credit score, it is a better alternative than owing the CRA and not being able to pay.

A consumer proposal or a bankruptcy is filed by a Licensed Insolvency Trustee (LIT) – formerly known as a Bankruptcy Trustee. But before you file, you should know that LITs represent both you and your creditors and they are paid on a percentage of what they negotiate. The larger the settlement or bankruptcy, the more money they make.

We recommend working with an independent debt counsellor, like DebtCare Canada, who is strictly on your side to advocate for you throughout the process.

Don’t ignore a CRA requirement to pay. DebtCare Canada can make sure you’re protected whether you’re dealing with the CRA or another creditor.

We have consolidation programs, consumer proposal and bankruptcy help, and more that will help you resolve your debt.

Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.