THE SOLUTIONS TO PAY BACK INCOME TAX DEBTS
SHOULD YOU BE UNABLE TO PAY BACK YOUR INCOME TAX DEBTS, A NUMBER OF ALTERNATIVES ARE AVAILABLE TO YOU. IN MOST CASES, IT IS RECOMMENDED TO START BY CONTACTING THE CANADA REVENU AGENCY OR REVENU QUÉBEC. IT IS A GOOD STARTING POINT SINCE IT IS POSSIBLE TO MAKE PAYMENT ARRANGEMENT DIRECTLY WITH THEM. THEREFORE, YOUR BUDGET COULD BE TAKEN INTO ACCOUNT TO MAKE A REPAYMENT PLAN.
PAYMENT ARRANGEMENT
On occasion, the Canada Revenue Agency or Revenu Québec may agree to enter into payment arrangements with individuals.
If you believe that you will be unable to reimburse your income tax debt, you may be able to enter into a payment arrangement where you will be allowed to make installments to reimburse the debt.
You will be required to comply with the arrangement, failing which it could terminate.
In the event of a default on your part, legal actions could also be taken against you to recover the outstanding amount.
RELIEF PROVISIONS
In some very specific instances, one may benefit from an income tax debt relief.
The Canada Revenue Agency or Revenu Québec could waive interest costs should you be unable to reimburse the outstanding amount without compromising your basic needs.
Basic needs include access to: shelter, food, mobility, medical care.
Such relief is provided only in exceptional circumstances.
CONSUMER PROPOSAL
The consumer proposal is a settlement offer made by a debtor to his creditors. It is a solution that allows to eliminate not only income tax debts, but also any other unsecured debt. An unsecured debt is a debt for which the lender has not registered a lien: that is the case of a credit card debt, for example :
The consumer proposal administrator determines your true ability to reimburse your debts.
The administrator prepares the consumer proposal and submits it to the creditors, including the Canada Revenue Agency and Revenu Québec.
The consumer proposal is a reimbursement offer corresponding to a percentage of your total debt.
If the offer is accepted, you will then have only one single monthly payment to make to reimburse the entirety of the debts included in the consumer proposal.
When the conditions of the consumer proposal are met, the income tax debts are considered to be paid off. All the other debts included in the proposal are also erased, and that applies even when the repayments cover only a fraction of the debts.
The recovery proceedings (threats, seizures, etc.) are suspended, and interest stops accruing!
SOLUTIONS FOR REIMBURSING YOUR TAX DEBTS?
BANKRUPTCY
If none of the other solutions apply, it then becomes possible to file for bankruptcy in order to settle income tax debts.
The Licensed Insolvency Trustee (LIT) notifies your creditors.
In the event of a bankruptcy, many assets are exempt from seizure.
Assets which are not exempt from seizure are sold by the LIT, and the proceeds of the sale apportioned to the creditors.
You then have a single monthly payment to make directly to the LIT. These payments are used to reimburse the creditors.
Depending upon several factors, the monthly installments stretch over a period of 9 to 36 months.
Once the conditions are met, you are discharged from bankruptcy and benefit from a fresh start, without debts.
THE COSTS OF A CONSUMER PROPOSAL AND A BANKRUPTCY
The only costs incurred when filing a consumer proposal or filing for bankruptcy are the monthly installments required to reimburse your debts. These monthly payments are based on your budget and your capacity to pay. There are no other costs.
The first evaluation session is free of charge with no obligations.
Setup and administration fees are included in the Licensed Insolvency Trustee’s (LIT) fees.
LIT’s fees are taken directly from the amounts to be remitted to the creditors according to the tariff prescribed by the law.
The amounts to be remitted to the creditors originate from the proceeds of the sale of assets and the monthly installments.
Two mandatory budget sessions are included at no additional cost.
THE PROTECTION PROVIDED BY THE CONSUMER PROPOSAL AND A BANKRUPTCY
Governed by the Bankruptcy and Insolvency Act, the consumer proposal and a bankruptcy offers debtors protection. The benefits of these two solutions are to :
STOP
interest from accruing
SUSPEND
recovery proceedings
CEASE
all forms of harassment
PROTECT
from wage garnishment
PROTECT
in the case of a consumer proposal, from seizure of assets
LIMIT
in the case of a bankruptcy, seizure of assets and provide a framework for the disposition of assets