There are many people who do not realize that tax debts can be dealt with through the filing of a consumer proposal or a bankruptcy. Unlike in the United States, most Canadian tax debts are treated just like any other creditor, with no special priority (but note that there are some exceptions).
A consumer proposal is a great option for individuals who face tax debts. It is a formal proceeding legislated by the Bankruptcy and Insolvency Act that provides an immediate stay of proceedings. What this means is that all collection activity stops upon filing the consumer proposal and no further interest is charged while the creditors are considering the consumer proposal offer.
After the filing of the consumer proposal, the creditors have 45 days in which to receive, review and vote on whether they want to accept the proposal. A majority in dollar value of those creditors who vote is needed to have the consumer proposal approved. Once approved, it is legally binding on all creditors. If Canada Revenue Agency (CRA) is your majority creditor, you will need their support for the consumer proposal to pass.
In order to have CRA agree to a consumer proposal you must ensure that your tax returns are filed up to date, that you provide your Trustee with a year to date provisional tax return so that your current tax debt is included in the filing, and to ensure the terms make sense not only for you but for CRA.
If you have unpaid tax debt and are feeling overwhelmed about how to manage the debt, contact D. Thode & Associates Inc. today for a free consolation where we can explain what a proposal would look like for you.