COVID-19 has left businesses on the edge of bankruptcy, and it gets even more difficult if you owe a debt to the CRA. This agency has precise collecting power processes that start with a notification before taking any action. In case that you have received or you know that you have an outstanding debt the best suggestion for you is to communicate with the CRA, if not they might take bigger actions without you noticing them.
CRA Collecting power
- The Right to Set-off: You may be in debt to one division but be owed money from another division within the CRA, in that case, they can hold the money owed to you and apply it against what you owe them.
- Registering Your Debt: The CRA can register your debt with the Federal Court of Canada with no warning.
- Registering a Lien: To pay off your debts to the CRA, they can seize and sell your assets.
- Garnishment: the CRA doesn’t need a court order to issue debt collection actions such as garnishments or freezing of bank accounts, they issue a ‘requirement to pay to your bank or employer who has no choice but to send money directly from your paycheque to the CRA instead of you.
What is Bankruptcy?
The main purpose of the Bankruptcy Act is to protect the rights of indebted individuals and their creditors. In addition, the Act ensures that trustees and the court execute their responsibilities and duties when it comes to debts. Finally, under the Act, individuals have the option to file for bankruptcy or create a consumer proposal.
At the end of the bankruptcy, all the debts are cancelled. It is considered a bad reputation to become bankrupt. So, you must take this decision only after proper credit counselling and effective debt management services across the Country. However, once you declare bankruptcy, both your credit card debts and the debts that belong to your family will be eliminated.
Will Bankruptcy Ever Override the CRA? The Bankruptcy and Insolvency Act will override the CRA collection process and the debt is eliminated.
However, there are some other solutions before you file for bankruptcy. The CRA debt forgiveness can be obtained by making a consumer proposal. They review your income and expenses carefully and find the best option that is suitable for you.
The other processes include Appeal, relief request of the taxpayer, and period of limitation.
It is important to be aware of what the CRA can and cannot do. If you’re currently struggling with your debt load and are interested in seeking the help of a professional, contact us, we’ll help you to make your life easier. We made accounting easy!