Financial difficulties can be a stressful experience, particularly if the Canada Revenue Agency (CRA) is one of your creditors. The prospect of dealing with CRA debt might seem daunting, but there are options available, such as including the debt in a consumer proposal. This article explores the question: Can you include CRA debt in a consumer proposal?
Understanding CRA Debt
Before proceeding, it’s crucial to understand what CRA debt entails. CRA debt can occur in several forms:
- Income Tax Debt.
- GST Debt.
- Source Deductions Debt.
- Director’s Liability for Corporate Tax Debt.
Each of these types of debt represents a specific financial obligation to the CRA, and they can all potentially be included in a consumer proposal or bankruptcy filing.
The Role of the Bankruptcy and Insolvency Act
According to Canada’s Bankruptcy and Insolvency Act (BIA), both business and personal debts, including those owed to the CRA, can be included in a consumer proposal or a bankruptcy. This means that debts like income taxes, GST, source deductions, and even liabilities as a director of a corporation for unremitted amounts can be addressed through these financial recovery tools.
Crafting a Consumer Proposal
A consumer proposal is a legal agreement set up by a Licensed Insolvency Trustee (LIT) between you and your creditors to repay part of your debts over a period of time. The proposal will detail the percentage of the total debt you will pay and the timeframe for the payments.
Importantly, the CRA cannot negotiate or settle on the principal balance or any interest owed directly. However, they will consider a consumer proposal if it ensures a better return than bankruptcy.
Key Elements for CRA Acceptance
For the CRA to accept a consumer proposal, it must meet certain conditions:
- The CRA should receive more money via the consumer proposal than they would in a bankruptcy scenario.
- If the CRA isn’t the only creditor, their vote on the proposal will count in proportion to the percentage of the total debt they’re owed. If other creditors approve the proposal, it will proceed regardless of the CRA’s vote.
- If the CRA is the major creditor, holding 50% or more of the total unsecured debt, they will have a controlling vote.
The Role of the Licensed Insolvency Trustee
A Licensed Insolvency Trustee plays a crucial role in both the creation and administration of a consumer proposal. They ensure the proposal paperwork is completed diligently, and they understand what creditors, including the CRA, will accept.
The Trustee will also administer the consumer proposal after it is accepted. They will collect the payments, distribute the dividends to the creditors, and file a Certificate of Full Performance once you have completed your payments.
The Advantages of a Consumer Proposal
There are several benefits to filing a consumer proposal when dealing with CRA debt. Firstly, from the date of filing, creditors (including the CRA) can no longer contact you directly. All inquiries must go through the Trustee.
Secondly, any legal actions or wage garnishments initiated by the CRA will cease. This protection provides debtors with peace of mind and the ability to focus on repaying their debts.
Lastly, a successful consumer proposal will result in you being released from your debts upon completion of all your proposal payments, allowing you to begin rebuilding your financial future.
Seeking Professional Assistance
If you’re facing CRA debt, it’s essential to seek professional help. A Licensed Insolvency Trustee can provide you with a free, confidential consultation to review your financial situation and determine the best solution for you. They can guide you through the process of crafting and filing a consumer proposal, ensuring that your proposal is as attractive as possible to your creditors.
Conclusion
Dealing with CRA debt can be a complex and stressful process, but it’s not an insurmountable obstacle. Filing a consumer proposal offers a viable solution for addressing this debt, and with the assistance of a Licensed Insolvency Trustee, you can navigate this process with confidence. So, to answer the question “Can you include CRA debt in a consumer proposal?” – yes, you absolutely can. The key is to seek professional advice and guidance to ensure that you’re making the best decisions for your financial future.
