Making a Proposal to Canada Revenue Agency
If you owe money to the CRA, you can clear your debt through bankruptcy or a popular bankruptcy alternative, the consumer proposal.
This guide provides advice for anyone considering making a proposal to the Canada Revenue Agency.
What is a consumer proposal?
A consumer proposal is a legally binding agreement between an individual and their creditors.
The proposal is a payment plan, which is put forward by a debtor as a means of repaying debts.
In most cases, the individual agrees to pay a portion of their debt either through a lump-sum or through regular payments.
A consumer proposal is compiled by a licensed insolvency trustee (LIT) and it is considered by the creditors involved.
In order to accept a proposal, a majority of creditors must vote in favor of the agreement.
For many Canadians struggling with debt, a consumer proposal offers an alternative to bankruptcy.
Between March 2018 and March 2019, personal insolvencies in Canada rose by 4.3%, with consumer proposals accounting for 57% of insolvencies during this 12-month period.
Making a proposal to the CRA
If you owe the CRA, you will need to be aware of certain rules and regulations when putting together a consumer proposal.
- Updating and filing all tax returns before filing a consumer proposal.
- Filing tax returns due during the proposal period on time.
- Paying taxes due during the proposal period. The proposal will outline the schedule for the repayment of taxes owed prior to the application date.
- If a tax refund is due on previous payments, this will be deducted from the outstanding balance of the CRA bill.
It is crucial to understand that the CRA will only enter into an agreement with a debtor through a consumer proposal.
This is to ensure that all assets and liabilities are disclosed and that all your outstanding debts are treated in the same way.
The CRA will not enter into any form of informal debt negotiations with individuals and they will not accept a debt management plan that doesn’t cover the full amount.
Filing a consumer proposal with the assistance of a licensed insolvency trustee is the only way to reduce your CRA debts.
When you compile a consumer proposal, your taxes will be listed as an unsecured debt, providing that the CRA has not already taken out a lien on a property you own.
Like credit card debts, your tax debt can be reduced by filing a consumer proposal.
If the majority of your creditors accept the proposal, the CRA must go with the majority vote.
Help and advice
If you are thinking about making a proposal to the CRA, it’s critical to have experienced experts in your corner.
We can help you find a trustworthy licensed insolvency trustee and set the wheels in motion.
A consumer proposal can minimise stress and help you move forward.
Making a proposal to CRA is slightly different from other creditors, as there are additional rules and criteria in place.
If you have any questions or you need advice from a trustee, don’t hesitate to get in touch.
Filing a consumer proposal is an effective means to take control of debts and reduce payments.