Yes, death and taxes are inevitable.

You’ve heard the old adage that the only two certainties in life are: death and taxes.

Well, it’s ‘tax time’ again and the truth is that you can rarely escape your tax obligation to Canada Revenue Agency (CRA).

Unlike some of your other creditors, CRA has unique powers to collect what you owe and they will still charge penalties and interest on all of your overdue taxes. It’s a policy designed to keep us on the straight and narrow. So, if you do get into arrears, watch out, until the debt is paid in full, the CRA can

  • withhold child tax credits
  • withhold GST credits
  • can take money from your bank account
  • garnishee your wages without getting a judgment against you.

CRA has millions of taxpayers and they are almost always unwilling to accept less than full payment; ‘almost’—because there are situations where some relief is available. This is where we can help!

If you do owe personal income taxes and can’t pay the balance in full, you can always explain your situation to CRA and try to negotiate a payment plan. For example, if you owe $1,000, you may offer to pay $100 per month for the next ten months. If CRA accepts your offer, you’ll likely still pay interest until your debt is paid.

Another option is to make a formal Proposal to CRA. This is done with the help of a Bankruptcy Trustee. A Proposal isn’t bankruptcy but rather a means to explore other ways to address a variety of debt problems. Making a Proposal to CRA and your other creditors (banks, pay day loan providers/cash stores) is quite common. A Proposal can be a way to reduce the overall amount you owe, negotiate lower re-payments amounts and/or expanded repayment terms.

Making a Proposal to CRA does not guarantee a reduction of your overall tax debt or extended payment terms, but if you meet their criteria, there is a better chance it will be accepted. CRA will be looking to see if your taxes are filed and up to date and, if prior to your Proposal you have to have been a taxpayer in good standing. You’ll need to make a case for extreme circumstances hindering your ability to pay the full amount as due—and demonstrate you are truly an honest and unfortunate debtor.

The Proposal will only include taxes owing prior to the Proposal date. Tax returns due during the Proposal period must be filed and any tax owing paid as due. Depending on your situation, payments negotiated through a Proposal could be made for up to five years.

The other option to addressing tax debt is bankruptcy. It’s a common misconception that personal income tax debt is not discharged by bankruptcy. This is not true; personal income taxes are covered by bankruptcy and this solution should be discussed fully with a Bankruptcy Trustee to see if it’s the best solution for your situation.

If you are facing financial struggles or would like some help with managing your debt—one of our professionals is available to discuss your situation. There are many options available to help and you may not need to go bankrupt. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll free from anywhere in Alberta and BC 310 8888.

In Alberta: www.gt.alger.ca     In BC www.GTdebt.ca

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We can help with tax (CRA) debt!

Bankruptcy: New RESP Exemption

Finally some good news for Alberta consumers facing bankruptcy. Whether this is a move to further protect the opportunity for continuing education, and subsequently, the financial benefits that may come with additional education or just falling into line with current RRSP exemption rules, either way, it’s a move we are in favor of.

For some of the individuals that we see, debt is something they have always lived with, often times it’s a financial ways of life that has been passed down from their parents. Many of the people that struggle with financial challenges never had the opportunity to continue their education so we see this as a move to protect that opportunity, regardless of the debt solution.

Effective April 1, 2014, Registered Education Savings Plan (RESP) contributions are protected from your creditors if you file a bankruptcy in Alberta.

The law that protects RESPs is the Civil Enforcement Act (AB), a provincial law, which was amended to safeguard your contributions for the future post-secondary education costs of your child.  With increasing tuition costs, this is good news for the consumer, especially the consumer struggling with their finances and contemplating filing a bankruptcy.  You can breathe a sigh of relief knowing that the contributions made to the RESP plan for, in some cases, over a significant period of time, are now given the same exemption status as RRSP and Pension funds.  The change also preserves the funds in the plan contributed by the federal government referred to as the government grant portion of the RESP.  The grant portion can be significant at up to $500 per beneficiary each year up to a lifetime limit of $7,200.

For those who are considering bankruptcy in Alberta, you don’t need to cash out your RESP under the belief that the funds would be seized on filing a bankruptcy.  For more information on assets that are protected, please speak to one of the experienced Trustees at Grant Thornton.

If you are facing financial struggles or would like some help with managing your debt—one of our professionals is available to discuss your situation. There are many options available to help and you may not need to go bankrupt. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll free from anywhere in Western Canada 310 8888.

For Alberta: http://www.gt.alger.ca

*Written by Freida Richer, CIRP   Principal and Trustee in Bankruptcy for Grant Thornton Limited.

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