A common misconception among debtors is that government debts are impossible to settle or forgive. However, with the right strategies and interventions, even individuals or businesses with significant government liabilities can find relief. This article explores the various Debt Solutions for Having Government Debts Forgiven in Canada.
Understanding the Nature of Debts
Before delving into the specific solutions, it’s crucial to understand that not all debts are created equal. Consumer debts such as credit card balances, lines of credit, overdrafts, or payday loans can be managed through various methods like consolidation loans, Consumer Proposals, or bankruptcy. However, government debts require specific legislated debt solutions.
Licensed Insolvency Trustees: Your Key to Debt Forgiveness
Many people are surprised to learn that Licensed Insolvency Trustees (LITs) can help them include government-related debts in bankruptcy or Consumer Proposals. LITs are professionals with specialized qualifications and regulated by the Canadian government, making them uniquely positioned to help individuals access debt solutions under Canada’s Bankruptcy and Insolvency Act.
Handling Tax Debts
One of the most common types of government debt is tax debt, specifically Canada Revenue Agency (CRA) tax debt. It’s important to understand that this type of debt can accumulate interest and penalties quickly, making even a small initial balance challenging to pay off. The CRA can also begin aggressive garnishments, including wage and asset seizures, almost immediately.
However, outstanding debts with the CRA can be included in a personal bankruptcy or consolidated in a Consumer Proposal. This includes balances due for personal income taxes, GST or PST, as well as corresponding interest and penalties. Once you file for bankruptcy or a Consumer Proposal, all accruing interest is halted, as are wage garnishments or bank account seizures that may already be in place.
Medical Services Plan (MSP) Debt
Although BC MSP premiums were abolished on January 1, 2020, unpaid balances from the past remain payable. MSP premiums were based on previous years’ income tax returns, and if you were behind in tax filings, you might have been ineligible for premium assistance and charged the full premium amounts.
However, both your outstanding MSP balance and any compounding monthly interest charges can be eliminated and written-off through filing a bankruptcy or Consumer Proposal in BC.
Employment Insurance (EI) Debt
Overpayment of Employment Insurance benefits can occur due to application and reporting errors or decisions made regarding insurability. The CRA provides collection services for money owed for EI overpayments, and if you are unable to repay the balance, you may face the same consequences that the CRA imposes for collecting tax debts. This includes income garnishments and asset liens and seizures by the CRA.
However, like tax debts, EI debts can also be included in bankruptcy or Consumer Proposals.
Social Assistance Overpayment Debts
Provincially governed, social assistance overpayment debts are generally forgiven under a bankruptcy or Consumer Proposal.
The Impact on Future Benefits
Even if you declare bankruptcy or make a Consumer Proposal to eliminate government debt, you will not be prevented from receiving future government benefits. Your eligibility for EI benefits, emergency benefits, housing benefits, pensions, and more will not be impacted by a prior government debt being included in or written-off as part of your bankruptcy or Consumer Proposal.
Student Loans
Student loans can also be part of the debts included in a personal bankruptcy or Consumer Proposal filed in BC. However, two key factors determine how your student loans are ultimately resolved — the date your studies ended and the type of student loans you have.
ICBC Debt
ICBC debts can be categorized in various ways, including claims, “motor vehicle indebtedness,” outstanding AutoPlan insurance payments, unpaid Driver Penalty Point Premiums, Driver Risk Premiums, unpaid fines for offenses, or motor vehicle-related offenses under the Criminal Code such as unpaid speeding tickets.
Most ICBC debts will be forgiven under a Consumer Proposal or bankruptcy. However, temporary restrictions may be placed by ICBC, such as a temporary denial of license, insurance renewal, or subsequent license plates.
Navigating Government Debts
Facing a substantial balance owing from the provincial or federal governments of Canada can be overwhelming and stressful. It’s crucial to get advice about how to manage government debts, as well as any other types of debts you may have, from a Licensed Insolvency Trustee.
Conclusion
Navigating the complex world of Debt Solutions for Having Government Debts Forgiven can be daunting, but it doesn’t have to be a lonely journey. With the right advice and guidance, you can find a way out of even the most challenging debt situations. So, take the first step today and connect with a caring, non-judgmental BC Licensed Insolvency Trustee for a free, confidential debt consultation.