If you owe money to the Canada Revenue Agency (CRA) but cannot pay it, you must take action immediately. Ignoring your debt will simply make your financial situation more serious.
What if you do not pay what you owe to the Canada Revenue Agency?
The CRA, which was formerly called Revenue Canada, expects to be paid in full, and on time. The CRA has extensive financial and legal powers, which include:
- Charging penalties and interest on your outstanding bill
- Withholding any money the federal government owes to you, such as GST/HST credit cheques
- Issuing a garnishment to intercept funds by your bank or employer
- Legally registering your debt with the Federal Court, which makes your debt public record
- Registering against your assets, including your home, investments, and car
What if you cannot pay your debts to the Canada Revenue Agency?
If you are in an overwhelming financial situation and cannot pay your debts, you must get professional advice and analyze your finances.
You may be able to make a payment arrangement with the CRA. You would have to prepare a full financial disclosure for a CRA collections officer, and if the CRA agrees you cannot pay your current debt in full, they will formulate a repayment plan.
However, you must make all these payments on time. If not, the CRA will cancel the repayment plan and could begin legal action.
Bankruptcy trustees will advise you of your other options. Consolidating your debts, making a consumer proposal, or filing for personal bankruptcy are all options to consider.
Filing for bankruptcy is the most serious of these options, but if your debts are mounting and overwhelming it could be your best option. If this is the case, you would follow the government rules regarding your bankruptcy and in return once completed you can be discharge your debts including income tax debt up until the date of your bankruptcy.
Source used in researching this article include Canada Revenue Agency: When you owe money – collections at the CRA