Personal Taxes And Consumer Proposals: How Does That Work?

I am often asked if personal income tax and / or GST debt can be dealt with through a Consumer Proposal. The short answer is yes; however, the Canada Revenue Agency (CRA) is becoming more involved in the process and will perform a fair amount of due diligence.

As an example, I recently assisted an individual (let’s call him Tom) who had been dealing with some very serious health issues. Consequently, Tom fell behind on his tax obligations and was having difficulty getting back on top of things. The CRA had become quite assertive in their collection activity, going so far as to garnish his employment income.

Person looking at their computer

Tom decided to come and see me. He really did not want to file for bankruptcy, which is why he had waited so long before coming in for a free consultation as he thought that bankruptcy was the only option available when it came to dealing with his tax debt. Needless to say, he was relieved to find out that a Consumer Proposal could be a viable alternative. Tom provided me with the information I needed to work out a potential payment plan and he came in and signed the Consumer Proposal documents. I then filed the paperwork with the Office of the Superintendent of Bankruptcy and received an estate number (or file number). Once I had the estate number, I was able to contact the CRA and advise them that they could not continue to garnish Tom’s income.

The CRA did initially vote against the Consumer Proposal but asked for additional information, which Tom happily provided. While it did take some time, we were able to work out a Consumer Proposal payment plan that both Tom and the CRA were in agreement with. Tom is happy because the amount he is paying in the Consumer Proposal is less than the total amount he owed. In addition, interest has stopped and Tom now feels like there’s an end in sight. The stress of collection activity and garnishment of his income has ceased and he can focus on his health and getting back on track both physically and financially.

I have dealt with a number of Consumer Proposals where the CRA was the main creditor and was actively involved in the Consumer Proposal process. In most cases, we were able to reach an agreement with the CRA. With that being said, each person’s situation is unique and the final decision on whether to accept a Consumer Proposal rests with the creditors. Therefore, it is important to work with someone who has experience in dealing with these types of situations to ensure the highest likelihood of a successful outcome. If you are dealing with tax debt or any debt for that matter, your local MNP Licensed Insolvency Trustee would be happy to meet with you to discuss your situation and options so you can get back to living your life and working towards a strong financial future!

Carolyn Chornopski is an Insolvency Administrator within our Vancouver location. To learn more about how MNP Debt can help you, contact any of our local offices at:

Vancouver (Downtown)
1021 West Hastings Street, Suite 1600 - MNP Tower,
Vancouver, BC, V6E 0C3
T: 604.639.0001
F: 604.904.8628

North Vancouver
100 - 1124 Lonsdale Avenue,
North Vancouver, BC, V7M 3H1
T: 604.982.2111
F: 604.904.8628

Vancouver (South)
1200 West 73 Avenue, Suite 1100,
Vancouver, BC, V6P 6G5
Main: 604.639.0001
Fax: 604.904.8628

Richmond
13777 Commerce Parkway, Suite 350,
Richmond, BC, V6V 2X3
T: 604.639.0001
F: 604.904.8628