All About Bankruptcy in Canada
Should I File Bankruptcy?
Alternatives to Filing Bankruptcy in Canada
What if I Have Outstanding Income Tax Debt During Banruptcy?
You can often make a deal with the Canada Revenue Agency (CRA) for taxes you owe. You can either negotiate payment terms or file a proposal under the Bankruptcy and Insolvency Act (BIA) rather than filing for bankruptcy.
Negotiate Payment Terms with the CRA
If you owe the CRA and cannot pay the balance in full, you can explain your financial situation to the CRA and negotiate a payment plan. For example, if you owe $1,000, you may offer to pay $100 per month for the next ten months. Be aware that even if CCRA accepts your offer, you will continue to be charged penalties and interest until your debt is paid in full.
If you are unable to successfully negotiate terms, the CRA may take further action against you to collect the taxes owing. They can withhold tax refunds and GST Credits, garnish your wages or accounts receivables, take funds from your bank account and/or place a lien on any real property you own until your debt is paid in full. They do not have to go through the Courts so they can act very quickly.
File a Proposal
Another option available to you is to file a proposal. Under a Proposal, CCRA may accept less than the full amount owing.
A proposal is a legal process under the BIA that enables you to make an offer to all creditors to modify your payments or to pay them a percentage of what you owe. A proposal allows a fresh start without going bankrupt. In a proposal, all of your assets must be disclosed, and all your creditors must receive a better financial settlement than they would if you were to file bankruptcy. You must contact a licensed Trustee, such as Alger & Associates, in order to file a proposal. Terms of the proposal will depend on your unique situation.
For the CRA to accept your proposal, it must include the following terms:
For some cases the CRA may require additional terms.