What are my options for dealing with tax debt?
What special rights does the Canada Revenue Agency have with respect to collection of unpaid taxes?
How do I compromise my income tax debt?
Does the amount I owe to Canada Revenue Agency affect my options?
What are my options for dealing with tax debt?
Owing money to the government regarding tax debt is no different than owing money to any other creditor and it can be discharged by filing personal bankruptcy or making a consumer proposal.
What special rights does the Canada Revenue Agency have with respect to collection of unpaid taxes?
In absence of filing personal bankruptcy or making a consumer proposal the Income Tax Act (ITA) gives the Canada Revenue Agency (CRA) special collection rights. These rights are referred to as “enhanced garnishment provisions”. The enhanced garnishment provisions include the ability to garnishee wages and seize assets without a court order. The CRA can also register an involuntary lien (mortgage) on the title of your property.
By filing personal bankruptcy or making a consumer proposal all collection action is stopped and the CRA cannot continue to enforce any enhanced garnishment provisions.
The issue is if the CRA registers a lien on the title of your property prior to your filing personal bankruptcy or making a consumer proposal the lien will survive.
How do I compromise my income tax debt?
File a formal consumer proposal with a licensed trustee. The CRA won’t accept informal proposals from credit counsellors or any other professionals
Does the amount I owe to Canada Revenue Agency affect my options?
Only if you are considered a ‘High tax debtor’. A high tax debtor is anyone that files personal bankruptcy and owes the CRA in excess of $250,000. These individuals are not eligible to receive an automatic discharge from bankruptcy and must obtain their discharge from the court. A CRA representative will attend the court hearing and their discharge may be made conditional upon additional payments being made.
This is not an issue if you decide to make a consumer proposal.
