Eliminate Your CRA & Income Tax Debt with a Consumer Proposal.
During tax season, Licensed Insolvency Trustees (LITs) see the volume of consumer proposals and bankruptcy filings increase, as people who already have a significant amount of personal debt prepare their tax return and realize they also owe income tax debt to Canada Revenue Agency (CRA). Often, the addition of income tax debt to an already tight financial situation can be the tipping point, and force people to consult a Licensed Insolvency Trustee to discuss their options for reducing and eliminating their debt.
Let’s discuss the consumer proposal process which is, in short, a federally regulated debt reduction program designed to reduce your total unsecured debts, including tax debt. In a consumer proposal, you, with the assistance of your LIT, would offer your creditors a five-year repayment plan, with no interest, which often results in you paying back significantly less than the original balance of your debt. Contrary to popular belief, income tax debt is another type of unsecured debt that has no special standing and can be eliminated by a consumer proposal just like many other types of debt including bank loans, credit cards, payday loans, and more.
Filing a consumer proposal can offer you several advantages if you’re struggling to repay your income tax debts, including the following:
1. Reduced Debt
A consumer proposal allows you to negotiate with your creditors, including CRA, to reduce the amount of debt owed. This can significantly reduce the amount of money you need to repay, making it easier to manage your finances.
2. Protection from Collection Actions
Once a consumer proposal is filed, creditors, including CRA, are legally required to stop collection actions against you, including wage garnishments, lawsuits, and collection calls.
3. Consolidated Payments
A consumer proposal consolidates what was formerly multiple individual debt payments to several creditors into a single monthly payment, making it easier for you to manage your finances and stay on top of payments including ongoing bill payments and potential ongoing income tax remittance obligations.
4. No Interest Payments
Unlike other debt relief options, such as a debt consolidation loan, a consumer proposal does not accrue interest. This means that you will only need to repay the principal amount of your debts, which can save you a significant amount of money in the long run.
5. Flexible Payment Terms
A consumer proposal allows you, with the assistance of your LIT, to negotiate flexible payment terms with your creditors, including longer repayment periods and lower monthly payments. This can help ensure that you are able to make your payments on time and avoid defaulting on your payments.
Overall, filing a consumer proposal can be an effective way for you to manage your income tax debts and achieve financial stability. It’s important to note that a Licensed Insolvency Trustee (LIT) is the only regulated professional who has the legal authority to administer a bankruptcy or consumer proposal to eliminate your tax debts. A consultation with a Licensed Insolvency Trustee will help you understand the potential impact of a consumer proposal on your overall financial situation, or help you determine if there is another option that might be better suited to you. Book your free consultation with a Licensed Insolvency Trustee online or give us a call at 888-751-2668.