Can Bankruptcy Eliminate Tax Debt?
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Many people who seek the assistance of a licensed insolvency trustee have substantial unpaid taxes that they owe to the Canada Revenue Agency (CRA) and they wonder can bankruptcy eliminate tax debt or if the CRA will accept a deal for taxes owed debt.
Fortunately, the answer is yes and it is possible to negotiate a payment settlement with the CRA about taxes you owe and eliminate tax debt through bankruptcy.
Can Bankruptcy Eliminate Tax Debt? Negotiating With Revenue Canada (CRA)
The first step you should take when dealing with Canada Revenue Agency debt is to contact your nearest CRA office. You will have to explain your financial situation and why you cannot pay your taxes as owed. When negotiating with CRA you can offer to pay the taxes you owe in instalment payments over a period of time. If you owe $1,000 in taxes that you are unable to repay you can offer to pay $100 a month for 10 months, plus any interest charges or penalties the CRA might impose.
Of course, whether the CRA will accept your offer is up to them, and they might not accept your offer and take additional action against you for collecting on the taxes owed to them.
Even if your offer is accepted, the CRA will continue to charge you interest until your taxes are paid in full, and the CRA might withhold your child tax credits or GST credits until you have repaid your tax debt fully.
Can Bankruptcy Eliminate Tax Debt? What if I Cannot Reach an Agreement With CRA?
If you are unable to make a settlement agreement with the Canada Revenue Agency you can speak to a bankruptcy trustee by scheduling a confidential initial consultation. In certain cases you can wipe out CRA tax debt with a consumer proposal or bankruptcy.
A consumer proposal gives you a chance to repay a portion of your debts over a period of time, and if accepted, the CRA will not be able to prevent your tax debt being included in the proposal.
A bankruptcy can also wipe out tax debts and give you a fresh financial start. If you owe tax debt and are unable to negotiate with the CRA we can help you deal with your CRA tax debt.
If you still have questions you can ask our licensed insolvency trustee your questions in confidence. Our bankruptcy blog also covers many topics on bankruptcy in Canada.
If you have any questions about this or other aspects of bankruptcy or consumer proposals you can set up a FREE consultation with our trustees, who are in every province and territory in Canada.