Many Canadians find the easiest debt to ignore is taxes owed the CRA. Red Deer residents are no exception here when given the difficult choice of paying utility and credit card bills versus writing a cheque to the CRA.
However, your tax debt will not go away on its own. You have to take some action and even doing nothing is a viable option, provided you know what can happen. Here are 7 facts about debts owed to the CRA Red Deer residents need to know:
1. You might be able to reduce the total you owe the CRA
2. The CRA is sometimes willing to negotiate directly with you on a repayment schedule
3. The CRA does not have to go to court to initiate collection activities against you
4. Doing nothing is an option
5. CRA will not work with credit counseling agencies or debt solution companies.
6. A consumer proposal is a way to reduce the total you owe the CRA
7. Personal bankruptcy may eliminate your CRA debt
First, while personal bankruptcy is the only way to walk away from your CRA debt, it is highly likely you can reduce what you owe them. If you have been ignoring income tax debt, chances are you haven’t paid attention to accurate filing either. You need to examine your past filings and make sure you are taking advantage of all the tax deductions you can. The best way to do this is to get help from someone with experience in tax issues. If you can’t afford to pay a professional, try to get help from friends, relatives, or business acquaintances who are up-to-date on Canadian tax law.
Second, if you could manage monthly payments that would pay back the total you owe the CRA in a 12-month period, they might be willing to enter into a negotiated repayment schedule with you. If you haven’t paid because you lost your job, had a medical emergency, or been the victim of a natural disaster, you could apply to the Fair Practices Commission of the CRA for a waiver of penalties and interest, reducing the total you owe.
Third, many Canadians fail to appreciate the power the CRA has to collect unpaid debt. While your other unsecured creditors must work through the legal system to get a wage garnishment or a property attachment against you to collect what they are owed, the CRA doesn’t need the sanction of the Canadian courts. They can garnish your wages as an administrative proceeding.
Fourth, if you do nothing, eventually the CRA will come after you with wage garnishments and property attachments. However, there are limits to how much they can garnish so if you are receiving federal assistance or have very low income, there is nothing for them to garnish. Similarly, if you own no property, there is nothing for them to attach.
In situations like these, doing nothing is an option but it comes at a high price. That CRA debt will remain with you as a blot on your credit for the rest of your life or until you pay it off.
Fifth, although the debt repayment plans offered by debt solution providers can’t help you with your CRA debt, they can lower your monthly payments enough on your other unsecured debt to allow you to negotiate a repayment schedule directly with the CRA.
Sixth, our bankruptcy laws allow consumers the option of filing a ‘consumer proposal‘ with their unsecured creditors where the total debt owed is reduced significantly. You have to meet with a licensed Red Deer bankruptcy trustee to see if you qualify for a proposal. If you do, your CRA debt becomes the same as your other unsecured debt. If a majority of your creditors accepts the proposal by dollar volume, the CRA is bound to honor the proposal.
Seventh, in a bankruptcy filing, CRA debt is treated like any other unsecured debt. Depending on the total you owe to all your creditors, the best option for dealing with debts owed to the CRA Red Deer residents have may well be personal bankruptcy.
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