Does the CRA Recognize Consumer Proposals for Tax Debts?

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If you’re swamped with tax debts and considering a personal bankruptcy, a consumer proposal might be your ticket out. It’s like striking a peace deal with creditors, letting you manage tax and other unsecured debts with less stress, more time, and smaller payments—a smart way to breathe easier financially!

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Question

Does the CRA accept consumer proposals? I’m curious about how consumer proposals interact with tax debts. Does the Canada Revenue Agency accept them, or are they excluded? How does this work with my tax situation?

From: Anonymous Question, Manitoba (MB)

Debt Insiders Answer

Absolutely, the Canada Revenue Agency recognizes consumer proposals as a nifty way to manage tax debts along with other unsecured debts. It’s like offering your creditors a peace deal where you’ll pay back a chunk of what you owe, under conditions they agree on. Including tax debts in these proposals is a smart move to dodge personal bankruptcy, as it lets you hash out a payment plan that’s easier on your wallet while handling tax and other debts all at once. This approach gives you breathing room to tackle your tax dues with less stress, smaller amounts, and more time to pay.

From: Anonymous Question

Office of the Superintendent of Bankrupty (OSB) Answer

Yes, the Canada Revenue Agency (CRA) does accept consumer proposals. Under the Bankruptcy and Insolvency Act, tax debts can be included in a consumer proposal. Specifically, Section 66.31 of the Act states that creditors, including the CRA, can be bound by a consumer proposal if they are given notice and an opportunity to vote on it. However, while tax debts are included, certain taxes such as those related to unfiled returns or fraud may not be discharged. It’s important to consult with a licensed insolvency trustee for detailed advice tailored to your situation.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

Related Questions

Here are the top 5 most frequently asked questions related to the acceptance of consumer proposals by the Canada Revenue Agency (CRA), formatted in markdown:

1. Can I include CRA debts in my consumer proposal?

Yes, you can include CRA debts such as personal income tax, source deductions, and GST/HST in your consumer proposal.

2. How does the CRA treat tax debts in a consumer proposal?

The CRA treats tax debts as unsecured debts and can be included in the consumer proposal, provided you are up-to-date on your tax filing.

3. Do I need to pay ongoing tax liabilities during a consumer proposal?

Yes, you are responsible for paying any tax liability incurred during the year of the proposal and subsequent years.

4. Are there any special conditions for including CRA debts in a consumer proposal?

You must be up-to-date on your tax filing to include CRA debts in your proposal, and the CRA’s claim will be for the period up to December 31 of the year prior to the date of the proposal.

5. Will a consumer proposal affect my obligation to pay future tax debts to the CRA?

No, a consumer proposal does not release you from paying future tax debts; you remain responsible for any tax liabilities incurred after the proposal is filed.

References

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