Can debts owed to the CRA and QRA be included in a bankruptcy?

Tax season can be stressful, especially for those who receive unpleasant surprises and must pay money to Québec Revenu Agency (QRA) and/or the Canada Revenue Agency (CRA). Tax season can present you with some difficult questions: How do you extract yourself from tax debt, which can drag on for years? Bankruptcy or a consumer proposal may be the solution for you.

CRA and QRA recourse options

Tax debt is widespread among consumers. If you do not repay it, its impact on your personal finances could go beyond simple interest fees.

The CRA and QRA have a lot of power when it comes time to repay the amounts you owe them. They are able to seize your tax refund directly at the source, meaning that they can seize your tax refund cheque to reduce the total amount of your debt. They can also seize a sum directly from your paycheque (wage garnishing), and even freeze your bank account(s). In some cases, a legal mortgage may be imposed on any real estate you own.

You can make a payment arrangement with the CRA and QRA. However, if collection measures have already been initiated, it can be difficult to stop them.

Even if you find yourself in this position, you can permanently free yourself from your tax debt and avoid measures such as wage garnishing. You have two options: bankruptcy and a consumer proposal.

In fact, bankruptcy and consumer proposals are both potential options to settle your tax debt.

Are bankruptcy or consumer proposals the best options to settle tax debt?

Bankruptcy and consumer proposals are two procedures that can be used to erase your tax debt. These procedures also provide protection against wage garnishing and tax refund seizure in subsequent years.

This protection is maintained throughout the bankruptcy or consumer proposal process. It prevents your creditors (including the CRA and QRA) from seizing your property, your wages, or even your government benefits to repay your tax debt.

Tax debt is often included in bankruptcy and consumer proposal applications. You can include tax debt not only for the current year (for bankruptcy), but also for previous years.

Upon release from bankruptcy or at the end of your consumer proposal, debts included in the procedure will be erased. It’s essential to talk to a qualified advisor to help you decide which solution would be best for your needs and financial situation.

Solutions to tax debt are more accessible than you think. Don’t wait to settle your debts: contact a Ginsberg Gingras Licensed Insolvency Trustee (LIT) to help you escape your conundrum.