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    If you owe tax debt to the Canada Revenue Agency (CRA), you likely know that this is a difficult situation to be in. This is because the CRA has very strong and very broad collection powers. If you owe tax debt, the CRA can garnish your wages, freeze your bank account and even seize your assets if you do not pay.

    To make the situation even more difficult for those who owe money, the CRA does not enter into debt negotiations with people. The agency also does not accept debt management plans, such as those created by credit counsellors. This means that you will not be able to have the overall amount owing reduced.

    In fact, the CRA will only consider waiving or reducing interest charges or penalties in very specific situations. These situations include:

    • Situations where the actions of the CRA resulted in penalties being filed or interest being charged. For example, a situation where a CRA processing delay resulted in a payment being filed late.
    • Extraordinary circumstances that were out of your control and caused you to miss a payment or file a payment late. This includes situations such as natural disasters, serious illnesses and other such incidents.
    • If you are able to prove extreme financial hardship, the CRA may consider waiving penalties or interest charges.

    In all of the above situations, it is important to note that the CRA will only consider waiving penalties or interest charges. They will not reduce or eliminate the overall amount owing, even if one of the above situations applies to you. Even if you meet the qualifications listed for interest or penalty relief, the process of applying for this relief is often lengthy and complicated. In some cases, it can take up to two years to resolve this process.

    Dealing with Tax Debt

    If you owe money to the Canada Revenue Agency and you are finding it difficult to pay this debt, you might be wondering if there is any way to reduce the overall amount owing. As you can see from the information listed above, the CRA will not enter into negotiations with individuals to reduce the amount owing and it will not accept a debt management plan. However, tax debt can be included in a bankruptcy filing or a consumer proposal.

    Both of these are legal processes and they may be an option for you if you are having difficulty paying your CRA tax debt.

    Consumer Proposal and Tax Debt

    A consumer proposal is a process through which you make an offer to your creditors to repay them a portion of what you owe over a period of time. Once you have made the agreed-upon payments and completed the consumer proposal, all remaining outstanding debt is eliminated. This legal process essentially allows you to reduce the amount of debt that you are expected to pay.

    A consumer proposal can only be filed by a Proposal Administrator who is also Licensed Insolvency Trustee. When you meet with an administrator, he or she will review your financial situation and determine what a fair offer to your creditors will be. This offer will then be sent to all of your creditors for review. Tax debt owed to the CRA can be included in a consumer proposal.

    If the majority of your creditors vote to accept your proposal, then all are bound by the terms of the proposal.

    If you are having trouble paying your tax debt and considering a consumer proposal, you should speak with a Proposal Administrator for more information. He or she can review your financial situation, provide you with details on the options available to you and help you file the proposal if you choose to do so.

    Personal Bankruptcy and Tax Debt

    You can also include CRA tax debt in a personal bankruptcy filing. Much like with a consumer proposal, you can only file for bankruptcy with a Licensed Insolvency Trustee. Bankruptcy is a process that is designed to give a fresh start to those who are unable to meet their financial commitments by eliminating most (if not all) of their debts.

    If you are considering bankruptcy, you should speak with a Trustee. Not only will a Trustee review your financial situation and provide you with details on the options available to you, but he or she will also review your assets and ensure that you are able to keep all exempt assets if you do decide to file for personal bankruptcy. Fill in the form below to schedule a free debt relief consultation with one of our debt relief professionals: