One of the most common questions from debtors would be, “Can you declare bankruptcy on CRA debt?”. It can be stressful for those with Canada Revenue Agency or CRA debt to consider how to pay it all on time.
Nobody wants to be stuck in CRA debt, but circumstances could often push them into the situation. In some cases, bankruptcy is the only way out that some debtors consider. However, how sure are you that it’s allowed? The direct answer is that you can still file for bankruptcy even with CRA debt.
Among the most common reasons people fall into CRA debt is when they fail to pay their taxes, whether personal or business. Things like deductions from employers or having inadequate deductions from your payroll could also lead you to CRA debt.
It can be very stressful to have to deal with CRA debt, and you want to settle it as soon as possible. Before you file for bankruptcy, it’s also essential to consider some other options available to you. Everyone has different financial situations, so there could be other choices that don’t include bankruptcy.
You can request a payment plan wherein the CRA can’t negotiate with you on back taxes. You can split the amount depending on how much you can afford. It’s vital that your representative contact the CRA before proceeding with any kind of payment plan.
Some payments could appear too expensive for others, so your Licensed Insolvency Trustee (LIT) will assist you. An excellent way to repay your debt is through a consumer proposal that you can discuss with your trusted LIT.
Once you've decided to declare bankruptcy, there are specific procedures you have to follow. It’s also important to note that you will be appointed a LIT to help deal with your debts. Even with CRA debts, you are required to work with a trustee.
Even if you are filing for bankruptcy, you should still check your finances. Every situation is unique when it comes to debtors filing for insolvency. You need to determine why you want to file for bankruptcy and whether you have assets to repay your debts.
You must consider filing for bankruptcy when receiving threatening or harassing calls from your creditors. Another reason to file for insolvency is when you’ve started missing your loan payments or mortgages.
If you use credit or cash advances to pay your bills and they’re always at the limit, it’s a sign you’re close to bankruptcy. Another sign to file for insolvency is when you’ve received a notice of legal action for your debts. When you feel too much pressure and anxiety about handling your debt, it might be time to file for bankruptcy.
You will need to talk to a LIT for professional advice. It’s vital, especially for those who have never filed bankruptcy. LITs will help you get through the process without spending too much time wondering what to do next.
Your LIT will be responsible for and authorized to administer government-regulated procedures related to insolvency. It will be under the power of the LIT to stop any pending or ongoing collection procedures involving you.
It is also part of a LIT's role to stop any garnishments from your work or lawsuits from your creditors. One of the best reasons for working with a LIT is how they can assess your situation and give you other debt payment options apart from insolvency.
Like any other legal procedure, you must complete various legal documents. When you have a LIT to help, they will direct you to which documents you must prioritize first. You can also ask them to bring some terminology into layman’s terms so you can understand your papers.
When you file bankruptcy in Canada, you have to finish an assignment declaring that your LIT is now in control of your properties. You will also need to complete a statement of affairs listing your assets, income, liabilities, and expenses.
Then you will have to complete your supporting documents. These include proof of income, assets, tax returns, and expenses. It will be the role of your LIT to compile your documents and register the case with the Office of the Superintendent of Bankruptcy.
One of the most crucial parts of bankruptcy is complying with the terms you’ve stated in your case. You will have to attend counseling, create reports, and make payments according to your agreement with your creditors in the insolvency case.
Some of the duties you will need to complete include attending counseling. Your LIT will be responsible for looking for reliable counseling sessions to help with your financial habits and money management skills.
You will also need to create a monthly report regarding your monthly income and expenses. Apart from that, you must ensure that you can pay for surplus income, administrative costs, and equity in assets; it differs depending on the nature of the case.
The final step in bankruptcy is getting discharged after you’ve completed your duties. Depending on the length of your payment agreement, most insolvencies get discharged after nine months. What’s sure is that the more diligent you are in complying, the faster you get discharged.
After being discharged, you no longer have to pay your debts. If you can’t complete your payment within the deadline, the court is called in to review your situation. They can create a new plan to help you get discharged from insolvency.
It’s more convenient and quicker when you work with a Licensed Insolvency Trustee. They are more knowledgeable about the bankruptcy process and have enough experience. You only have to follow their feedback and suggestions to file for bankruptcy successfully.
After being successfully discharged from bankruptcy, the best thing to do is to rebuild your finances. Avoid getting into too much debt; take your time and relax. If you want to go to more counseling sessions, then use this time to do so.
Debt can be exhausting and stressful for many. Bankruptcy is only one of the many options you can take when you want to end your debts quickly. If you ask your LIT, “Can you declare bankruptcy on CRA debt?” they will say yes and encourage you to look at broader options.