debtcare.ca

Category: Canada Revenue Agency Collections

  • CERB Ineligibility and Repayment – Actions CRA Can Take in 2021

    If you have received a letter from the CRA regarding Canada Emergency Response Benefit (CERB) ineligibility – you’re not the only one.

    Many Canadians have received letters regarding repayment of CERB for one of the following reasons:

    • Collected CERB payments from both Service Canada and the CRA.
    • Did not meet the minimum income requirement.

    According to CTV News, 441,000 ‘educational’ letters were sent to Canadians by mid-December.

    So, if you have received a letter that states that you may not be eligible, it may be because the CRA has been unable to confirm your eligibility, possibly because you have not filed your taxes in 2019.

    If that’s not the case and you have filed your taxes, you might have to pay the benefit back.

    CERB Repayment and Eligibility

    The reason why there has been some confusion about eligibility is because of what is and what is not considered as ‘income’. For instance, the minimum employment or self-employment income required to be eligible for CERB ($5,000) is net income and not gross income.

    Additionally, the following sources of income are not considered as employment or self-employment income when it comes to CERB:

    • Pension income;
    • Student loans;
    • Employment Insurance payments;
    • Disability benefits;
    • Family support and social assistance payments;
    • Other benefits such as Canada Child Benefit (CCB);
    • And investment Income.

    So, if this criterion is not met, CRA is encouraging individuals to return the benefit they have claimed.

    The process for returning CERB is quite straightforward. If you applied for and received the CERB from the CRA and Service Canada, you can view step-by-step guidelines for repayment here.

    As of mid-December, according to Narcity, the CRA has received almost 1 million returns.

    What Action Can CRA Take?

    If you are unable to repay the benefit, the CRA requires you to contact them and make a payment arrangement.

    While CRA has taken a more relaxed approach to CERB repayments last year and informed individuals to repay the amount voluntarily, if the payments are not made, the CRA may take a tougher approach.

    While a stronger collection action has not been indicated at this point, once this amount gets added to your overall debt with the CRA, it can lead to the agency withholding benefits and credits, imposing penalties, as well as taking other legal actions.

    What Are Your Options? 

    So, when it comes to CERB repayment, you have the following options available to you:

    • Full repayment of the benefit.
    • Making repayment arrangements with the CRA.
    • If you’re unable to make payments and are dealing with additional debt, you can look into filing for bankruptcy or a consumer proposal. This is where a debt consolidation partner can help alleviate your debt burden.

    At DebtCare Canada, we are committed to helping you manage your debt and put strategies in place to become debt-free.

    If you are worried about CERB repayment or would like advice about debt management, you can contact us for a free consultation and an independent review of your financial situation.

    Reach out to us today at 1-888-890-0888 or visit www.debtcare.ca.

  • 2019 Tax Deadline Around the Corner – Let’s Review Current Penalties and Interest

    The Canada Revenue Agency (CRA) tax deadline for the 2019 tax year is coming up quickly. Are you prepared?

    The deadline to file your 2019 income tax is April 30, 2020.

    For self-employed tax filers, the deadline is June 15, 2020, however, it’s better to file by April 30 as you will be charged interest from May 1 to June 15.

    It’s critical to meet the CRA filing deadline to avoid late-filing penalties, interest, and collection action — even if you can’t pay.

    Here’s what you need to know about the 2019 tax filing deadline:

    CRA Interest

    One reason why you want to file on time and pay what you owe in full (or look into alternative options) is to avoid CRA interest charges.

    If you have a balance owing for 2019 and don’t pay it in full, the CRA can begin charging you daily compound interest on May 1, 2020. This includes any balance owing if the CRA reassesses your return.

    If you are charged penalties, such as a late-filing penalty, the CRA can also charge interest on this amount.

    If you have amounts owing from previous years, the CRA will continue to charge daily compound interest on those, too.

    CRA interest rates change every three months.

    CRA Late-Filing Penalty

    If you owe money to the CRA and miss the tax filing deadline of April 30, 2020 (or June 15, 2020 for sole proprietors) you can be charged a late-filing penalty.

    In 2019, this penalty was 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, up to a maximum of 12 months.

    If you’ve been charged a late-filing penalty in the past three years, you could be charged even more for missing the April 30, 2020 deadline — 10% of your balance owing, plus 2% of your balance for each full month your return is late, up to a maximum of 20 months.

    This is why, even if you can’t pay your full balance, it’s still best to file your return on time.

    Repeated Failure to Report Income Penalty

    If you failed to report an amount on your return for the 2019 tax year and you also failed to report an amount on your return for 2016, 2017, or 2018, you may be charged a repeated failure to report income penalty.

    If you did not report an amount of income of $500 or more for a tax year, it will be considered a failure to report income.

    The federal and provincial or territorial penalties are each equal to the lesser of:

    • 10% of the amount you failed to report on your return for 2019.
    • 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.

    In some cases, if you voluntarily tell the CRA about an amount you failed to report, the CRA may waive these penalties. However, if you choose to go this route it is better to do so with an advocate on your side (like DebtCare!).

    False Statements or Omissions Penalty

    If you knowingly make a false statement or omission, or do so through gross negligence, you could be charged a penalty equal to the greater of:

    • $100
    • 50% of the understated tax and/or the overstated credits

    Again, in some cases, you can voluntarily tell the CRA about a false statement or omission and have the penalty waived. Again, it’s best to consult a debt counsellor first, such as DebtCare, before negotiating with the CRA.

    What To Do If You Owe Taxes But Can’t Pay

    As we’ve mentioned, if you know you will owe but can’t pay, it’s still important to file before the April 30, 2020 tax deadline.

    Don’t just hope that it will be overlooked or go away on its own – it won’t, and you’ll end up accruing more interest and penalties. In some cases, the CRA will waive the penalties or interest, but you will still owe the principal amount.

    Instead, make a plan for how you will pay what you owe.

    This could look like:

    • Making room in your budget to find the amount owing.
    • Taking out a personal loan that you can repay over a longer period and using the money to pay the CRA.
    • Consolidating debt.
    • Refinancing your mortgage.
    • And more.

    If you truly cannot pay, nor can you access a personal or debt consolidation loan, you can stop CRA collection action by filing for bankruptcy or for a consumer proposal.

    Get A Head Start By Contacting a Debt Counsellor

    At DebtCare Canada, we provide access to one of the only programs that can resolve a CRA back tax problem.

    Whether it’s personal income tax, HST, or payroll, DebtCare Canada can help! Get ahead of your tax problem. Reach out to us for a free consultation by calling 1-888-890-0888 or learn more about our CRA Tax Debt program at https://debtcare.ca/back-taxes/.

  • Wage Garnishment 101 – Know Your Rights and Options

    If you’ve received a wage garnishment, you might be feeling scared and confused. You need to know how to stop it — and fast.

    But that’s not always easy to do. There are different types of wage garnishments — and each one has different options to deal with it.

    To stay protected and even stop wage garnishments, you need to know your rights and options.

    What is a Wage Garnishment?

    Collection agencies, the Canada Revenue Agency (CRA), and other government bodies use wage garnishments to collect money they claim a person owes. The garnishments come directly from your paycheque. If you own your own business, your clients might receive a requirement to pay notice instead.

    The garnishment takes a percentage of your regular paycheque to pay the debt owed. If you’ve received a wage garnishment, you’ll be bringing home a lot less income.

    Types of Wage Garnishments

    There are different types of wage garnishments. The type you are issued depends on the agency involved.

    The type of garnishment you receive can affect how much money comes off your paycheque, how you’re notified about the garnishment, what kinds of income are garnished, and more.

    These are the most common types of garnishments:

    1. Collection Agency/Creditor

    If you owe a debt to a creditor, like a credit card provider, they can get a court order to have your wages garnished.

    Under the Ontario Wages Act, a collection agency or credit can garnish up to 50% of a person’s wages. The exact amount depends on the situation and the organization collecting the debt.

    In most cases, wage garnishments in Ontario take 20% of a person’s paycheque.

    The good news about this type of wage garnishment is that you will see it coming. Because it involves a court order, the creditor will have to take you to court. This might still be overwhelming, but it gives you time to prepare and make a plan.

    A typical creditor cannot garnish social assistance income.

    1. Ontario Small Claims Court

    If you have gone to the Ontario Small Claims Court for another legal matter and now owe money, a wage garnishment might be ordered to collect the payment. These conditions will look similar to a garnishment from a creditor or collection agency.

    1. Canada Revenue Agency

    Unlike creditors, the Canada Revenue Agency (CRA) does not need a court order to garnish your wages. In fact, they don’t even have to tell you they are doing so.

    This can be a particularly difficult wage garnishment to deal with. CRA collections are swift, and in some cases, you might not even get a warning. They can simply send a letter to your employer, your bank, or the Income Security Program office.

    They can also garnish more types of income, including Canada Pension Plan and Old Age Security funds. There is no limit to the amount they can take.

    This is why you should always take owing money to the CRA seriously.

    1. Family Responsibility Office (FRO)

    The Family Responsibility Office (FRO) deals with child support and spousal support payments. If you owe support money, there will be swift consequences.

    Not only can FRO garnish your paycheque, but they can also take other income, including sales commissions, Employment Insurance (EI), Workers’ Compensation, income tax refunds, severance pay, and pensions. Beyond that, they can take money from your bank account, register liens, and even suspend driver’s licenses and cancel passports.

    FRO can deduct up to 50% of any income-type funds, including EI and CPP, and 100% of tax refunds and interest on Bank of Canada savings bonds. If you have a bank account in your name only, FRO can take 100% of the amount owing to pay arrears.

    1. Canada Student Loans

    If you miss payments on your Canada Student Loan for 270 days (nine months) or more, your loan goes into default and is sent to the CRA for collection. The CRA can then proceed with their usual collection action.

    How to Stop Wage Garnishments

    Stopping a wage garnishment depends on the agency and type of debt. In every case, paying off the debt owed will stop your wage garnishment immediately. If you can’t pay, there are other options.

    • Consider debt consolidation to free up funds to pay what you owe.
    • Negotiate a voluntary arrangement with a creditor if possible. This may be harder to do if they already have a court order for the payment in full.
    • Go to court and petition to stop the collection action. This can be expensive and isn’t guaranteed, especially if it’s from a court order.
    • Work with a debt counsellor to file for bankruptcy or a consumer proposal. This will immediately stop most collection action, but there are exceptions.

    Exceptions

    • You can’t stop FRO payments by filing for bankruptcy.
    • You can’t include student loans in a consumer proposal or bankruptcy for the first seven years after finishing your studies.

    While getting a wage garnishment is overwhelming, a good debt counsellor will cut through the confusion. They will assess your situation, type of garnishment, rights, and options to find the right solution for you.

    If you’re dealing with a wage garnishment, contact DebtCare Canada today. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Liberty Tax Filers – What to Do if You Will Have a Tax Debt You Can’t Pay?

    It’s income tax season and many Canadian filers may be turning to online tax preparation services, like Liberty Tax.

    These services are great options for submitting your income tax return, and for finding more deductions and rebates you may not have known about. But what happens if you’re assessed with a tax debt that you can’t afford to pay?

    Online tax preparation services like Liberty help you file your taxes – but they don’t help you avoid CRA collections.

    If you owe a tax debt that you can’t pay, either through filing with an online tax service or with an accountant, here are some best practices to keep in mind:

    1. File even if you can’t pay.

    If you know you will owe a tax debt, file anyway before the income tax deadline of April 30. Not filing will only makes things worse.

    If you don’t file, you can be assessed with failure to file penalties, and even be charged with tax evasion.

    It’s better to get your return in and look into options for how to clear the tax debt, instead of just letting it fester.

    2. Seek outside tax help.

    While online tax services like Liberty are good tools for filing your return, they are not debt consultants. Case in point: at our last check, Liberty Tax Canada didn’t appear to have a dedicated resource page about owing a tax debt.

    Even if you use a tax service to get filed, the best people to help with an outstanding tax debt are, of course, people who understand debt. Even if you work with an accountant to get your taxes filed, the accountant will not necessarily have access to tax debt resources.

    Instead, you want to seek advice from an experienced tax debt consultant, preferably one like DebtCare Canada with a specific program for dealing with the Canada Revenue Agency (CRA).

    3. Don’t negotiate with the CRA on your own.

    The CRA offers options to negotiate a payment plan and even has some debt forgiveness programs for outstanding interest and penalties. While these can help do not attempt to use them alone.

    This is because the CRA can take the information you provide through these programs and use it to start collection action. For example, if you fill out a financial disclosure form with your banking information, the CRA now knows where you bank and can decide to freeze your account if you miss a payment.

    It’s far better to work with a CRA negotiating specialist.

    4. Look for ways to pay the outstanding tax debt.

    Ideally, it’s better to not owe the CRA at all. So, if you know that you will owe a tax debt you can’t afford to pay, you would (generally) be better off financially taking out a loan or accessing home equity and paying the CRA with that money, and then owing the lender instead of the CRA.

    This is because CRA collection action is so much more aggressive than what the majority of creditors can enforce.

    Also, many lenders will arrange a fixed payment plan, so you can plan out repayment in a realistic timeframe with realistic terms. The CRA may not do the same.

    5. Consider debt consolidation options.

    What can you do if you can’t get a loan big enough to cover the tax debt? The answer here lies in debt consolidation.

    If you have too much debt to qualify for a loan, or a bad credit history, you might look into debt consolidation options, or filing for insolvency.

    Filing for a consumer proposal or for bankruptcy effectively takes care of your unsecured debts by declaring that you are unable to pay them.

    In a consumer proposal, you make a settlement proposal to your creditors – including the CRA. If accepted by the majority of your creditors, your unsecured debts are paid for with a lesser amount. You must be able to prove that your creditors will get more money this way than if you were to file for bankruptcy. In a consumer proposal, there is a debt limit of $250,000 (not including your mortgage).

    If you have more than $250,000 in debt, you might consider a different kind of proposal, or filing for bankruptcy. In a bankruptcy, your assets are often sold to make up the debt owed.

    While filing for insolvency is often not the first choice, it’s a better option than owing a tax debt to the CRA. If you owe a tax debt, the CRA can start collection action – which could include wage garnishments, freezing bank accounts, liens on assets, and in some cases even criminal charges.

    Also, if you wait to pay your tax debt, you will be charged even more because you’ll start to incur interest and penalties.

    If you file your taxes through an online service, like Liberty Tax, remember to:

    • File your taxes on time.
    • Reach out to a debt consultant if you can’t pay.

    At DebtCare Canada, we provide access to one of the only programs in Canada that can resolve a CRA tax problem. We can help you deal with your tax debt quickly.

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

  • CRA Director Liability and You – Protect Yourself!

    CRA Director Liability and You – Protect Yourself!

    CRA Director Liability and You – Protect Yourself Before It’s Too Late!

    If you own, or are a director for, a company and accept trust money for the federal or provincial governments, you could be subject to CRA director’s liability.

    CRA Director Liability

    CRA director liability means that the Canada Revenue Agency (CRA) can decide that you owe a tax debt for your business – personally.

    Like anything, director’s liability is a process and there are ways that you can protect yourself if you’re assessed.

    Here’s what you need to know.

    What is CRA Director’s Liability?

    In Canada, incorporated businesses are considered separate legal entities from the owners’ personal assets and liabilities. If any debt is accrued by the incorporated business, the employees, officers, and directors are not held personally liable.

    However, this isn’t always the case – also known as director’s liability.

    If the CRA can’t collect an amount owing from the business directly, it may enforce director’s liability and assess the director, or directors, personally. This is most common with unremitted GST/HST trust money or unpaid payroll source deductions.

    What Happens if You Receive a Director’s Liability Assessment?

    If you are subject to director’s liability and can’t pay, the CRA might place liens on your assets, freeze your bank account, garnish wages, and more. And they can do this even if the corporation is no longer operating.

    If you are, or ever have been, the director of a corporation with a CRA tax problem, you need to act fast.

    How to Protect Yourself

    1. Do your due diligence.

    In the event that you are the subject of a director’s liability assessment, paperwork is your ally.

    If you can prove that you made your best efforts to have the corporation pay the GST/HST remittance or other deduction, then you may have a chance of having it overturned.

    According to Mondaq:

    “There is also a “due diligence” defence available to taxpayers who are assessed for CRA director liability by Revenue Canada. Subsections 227.1(3) of the Income Tax Act and 323(3) of the Excise Tax Act contain identical wording which states that a director is not liable for a corporation’s failure to collect GST/HST or Payroll Source Deductions if they “exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances”.

    However, this solution will likely require a tax lawyer and could end up costing more – especially if the circumstances cannot be proven.

    2. Make note of your resignation date.

    If you’ve resigned from the corporation, or are planning to resign, make sure the date is well-documented. This is because, in many cases, there has been a precedent set of a two-year limitation period.

    According to Lerners, many of the statutes that impose liability on a director have a two-year limitation period. For example, a claim for unpaid wages against a director under the Employment Standards Act, a claim for which there is no due diligence defence, cannot be made more than two years after a director resigns.

    However, if a director resigns on paper but continues to act like a director, then the two-year time limit is void. In addition, the resignation needs to be clearly stated. Lerners recommends being on the public record with your resignation and its effective date.

    “When government officials are considering an assessment against a director, the first place they check is the public record,” Lerners notes. “You do not want to be in the position where you receive a letter proposing to assess you personally when you resigned years before, but your resignation was never properly noted on the public record.”

    Again, this solution would most likely require a tax lawyer.

    3. Find solutions for the tax debt.

    There may be an event where you are being assessed for director’s liability and cannot afford to work with a tax lawyer or don’t have a defense available.

    In these cases, a CRA director liability assessment can be dealt with in the same ways as personal tax assessments: by making a plan for the debt.

    The CRA wants their money and you may have to pay it – so the solution becomes finding a way to raise the funds. This might include:

    • Taking out a secured loan.
    • Accessing home equity.
    • Insolvency options, like filing for a consumer proposal or personal bankruptcy.

    If you owe a director’s liability and know that you can’t pay it all, even if you use home equity or a loan, insolvency filing options may be the answer. When you file for a consumer proposal or personal bankruptcy, your unsecured debts — including tax debt — are included.

    This is the only way, besides paying the debt in full, to stop CRA collection action, such as requirements to pay, frozen bank accounts, and liens against your assets.

    Whether you decide to pursue litigation or deal with the CRA director liability tax debt directly, DebtCare Canada can help. We’ll go through your options and find the best way to stay protected.

    Do you have a CRA director liability, call 1-888-890-0888 or visit www.debtcare.ca for a free consultation.

  • CRA Penalties, Interest, and More – What to Do if You Will Miss the 2017 Tax Deadline

    The 2017 income tax deadline is nearly a month away. April 30, 2018 is the date you must file by or be subject to Canada Revenue Agency (CRA) penalties, interest, and possibly collection action.

    Tax time can be a source of stress — gathering your receipts, filing your return, and worrying about whether you’ll owe can be a hassle that’s tempting to avoid. But like it or not, paying taxes is something that can’t be avoided and if you attempt to do so, the stress and consequences will only be worse.

    Consider this case, reported on the CRA website. On December 4, 2017 a Cobourg, Ontario man was sentenced to a fine of $97,173 after pleading guilty to two counts of tax evasion for failing to report income on his personal tax returns from 2006 to 2007. This court-imposed fine is only one part of what he must pay. He also has to pay the full amount of tax owing (an additional $97,173) PLUS related interest and any penalties assessed by the CRA.

    This is a cautionary tale, but it’s also not uncommon. Between April 1, 2012 and March 31, 2017, courts have convicted 408 people for CRA tax evasion. This involved $122 million in federal tax evaded and court sentences totaling approximately $44 million in court fines and 3,103 months in jail.

    If you’re worried you’ll miss the 2017 income tax deadline, here’s what to do instead:

    1. File Before April 30, 2018

    If you’re owed money and you don’t file before the 2017 income tax deadline, you’ll just have to wait longer for your refund — and who wants that? Even if you’ll owe a tax debt, it’s better to file before the deadline to avoid CRA penalties.

    Interest begins accumulating on your tax debt on May 1, 2018 at a daily compounded rate. And on top of the interest, you’ll have to pay the CRA late-filing penalty.

    The CRA late-filing penalty is 5% of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late to a maximum of 12 months. And if you’ve been charged a late-filing penalty in a previous year, you could be charged 10% of your balance owing, plus 2% for each full month your return is late for up to 20 months. That’s a lot of extra money to pay on top of the balance you already owe. It’s in your best interest to file by April 30 and avoid the CRA penalties.

    1. Make a Plan to Pay

    If you can afford it, paying your tax debt in full is the best option for avoiding CRA penalties. Look at your budget and see where you can save to pay the tax debt.

    If you absolutely can’t pay in full with your current income, you may have other options available to you. For example, if you own a home with equity available and have good credit, you could be eligible for a home equity loan, which would allow you to pay off your tax debt and then pay your loan off over a fixed repayment schedule. If you don’t own a home, or don’t have equity available, there could be other lending options that you can access.

    Don’t share your income and expenses with CRA. Get a plan together first.

    1. Seek Professional Help

    If you’re going to miss the 2017 income tax deadline because you can’t pay your tax debt, even with a loan, consult a financial professional. Debt counsellors can help you go over your options, see what options are available to you, and help prevent or stop CRA collection action. Burying your head in the sand isn’t going to change your situation and will actually make it worse. If you’re not sure what to do, a professional debt consultant can help you find the way.

    DebtCare Canada can help you avoid the consequences of CRA penalties.

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

  • Question Corner: When Will CRA Garnishment Happen to Me if I Owe?

    The 2017 income tax deadline is looming on April 30, 2018 and with it the consequences of not paying a tax debt in full. One such consequence if you fail to pay a tax debt is Canada Revenue Agency (CRA) garnishment.

    A CRA garnishment is just one of several scary collections tactics that can happen if you fail to pay your taxes. CRA can garnish up to 50% of your employment income and 100% of your other income, such as contracts or pensions, simply by sending a letter to your employer, or your clients if you are self-employed. The person who receives this letter is legally obligated to send your money straight to CRA or they could face court action.

    Unlike other creditors, the CRA doesn’t need a court order to obtain a wage garnishment. And, scarier still, you may not even know when a CRA wage garnishment will start.

    A CRA garnishment can start any time after the 2017 income tax deadline once CRA has processed your income tax return and provided you with a notice of assessment. This is where you will see the exact amount that you owe.

    If you can’t pay the tax debt in full, that’s when wage garnishment and other collection tactics can begin. You may be able to make a payment arrangement with CRA, but this is nearly impossible for an individual to do on their own. And even if you are sending payments to CRA, they may still garnish.

    If you don’t pay your tax debt and CRA finds out where your income comes from, you are at risk for a wage garnishment.

    CRA can find out your income source in many different ways, such as:

    • You tell CRA or name your employer on a budget or disclosure forms given to CRA.
    • Tax filings by your employer(s).
    • Your client or supplier is audited.
    • And many more.

    There are options to stop a CRA wage garnishment depending on your income, assets, and debt. Some of these options will immediately stop a wage garnishment. Debt consulting companies, such as DebtCare Canada, can assess personal circumstances and arrange whatever solution is the right one.

    Don’t wait – call DebtCare today. We can walk you through the various options and help you avoid a CRA garnishment. 1-888-890-0888.

  • Does CRA Collections Need a Court Order to Take Enforcement Action?

    When you owe money to the Canada Revenue Agency, it is very different from owing money to a regular creditor, but at the same time very similar. While a regular creditor can indeed take measures to collect the debt, the same measures taken by the CRA, CRA collections doesn’t need to follow the same route. A regular collections agency has to take certain steps before taking enforcement action against you, most notably obtaining a court order. CRA collections does not.

    That’s right; CRA collections can levy enforcement action, including freezing your bank account, garnishing your wages, even placing a lien on your home, without first acquiring court approval.

    Furthermore, they don’t need to make you aware of the enforcement action.

    Once CRA collections has taken enforcement action, the only way to have it removed (other than paying the debt in its entirety) is through a consumer proposal or bankruptcy.

    In a consumer proposal, a proposal is made to your creditors – in this case the CRA – based on a calculation of your debt, income and expenses. If the CRA accepts the proposal, you make a single monthly payment and interest is stopped. As soon as the consumer proposal is filed, enforcement action is stopped. In many cases, not only will the consumer proposal stop enforcement action and interest, it may also reduce the overall amount of your tax debt. Often repayment of a consumer proposal takes 5 years – a much longer period of time (and thus lower monthly payments) than the CRA would accept had you called to negotiate directly with them.

    In the case of a bankruptcy, the process is different. You do not make a proposal to the CRA. In a bankruptcy (first time), an income calculation is done and a reasonable monthly payment amount is established. Once filed, you will pay monthly for 9 or 21 months, depending on your income. Once you have completed the terms of the bankruptcy – paying monthly, disclosing all income, paying any surplus income, participating in credit counselling – you will receive your discharge and can begin rebuilding your credit. As with a consumer proposal, as soon as the CRA is notified of your bankruptcy, collection action will stop.

    While both a consumer proposal and bankruptcy are administered by a trustee in bankruptcy, we don’t recommend going directly to a bankruptcy trustee. The trustee is not your representative alone and anything disclosed to them will also be shared with the CRA. The best approach is to speak with a financial consultant first, one who can manage this process and can be trusted to keep your financial information confidential as you formulate a plan.

    At DebtCare, we can help you develop a strategy to protect yourself. Call us first: 1-888-890-0888.