Introduction

Dealing with debt is a common financial challenge, and it’s essential to explore various options to find relief when you’re in a tight spot. In Canada, one source of debt that can be particularly worrisome is owing money to the Canada Revenue Agency (CRA) in the form of taxes or other government-related obligations. Many individuals wonder if their CRA debt can be included in a debt relief program. In this article, we will delve into the possibilities and considerations surrounding including CRA debt in a debt relief program.

Understanding CRA Debt

CRA debt typically arises from unpaid income taxes, GST/HST (Goods and Services Tax/Harmonized Sales Tax), payroll deductions, or other government-related obligations. When you owe money to the CRA, it’s crucial to address the issue promptly, as the agency has the authority to take various actions to collect the debt, including garnishing your wages, freezing your bank accounts, or placing a lien on your property.

Debt Relief Programs

Debt relief programs encompass various strategies and mechanisms designed to help individuals regain control of their finances. Some of the most common debt relief options in Canada include debt consolidation loans, consumer proposals, and bankruptcy. Each option has its advantages and considerations when it comes to including CRA debt.

  1. Debt Consolidation Loans:
    • Inclusion of CRA Debt: Debt consolidation loans may allow you to include your CRA debt, along with other unsecured debts like credit card balances, personal loans, and lines of credit. This consolidates all your debts into one manageable monthly payment.
    • Advantages: Consolidation loans typically offer lower interest rates compared to CRA interest and penalties. They also simplify your financial situation by combining multiple debts into a single payment.
    • Considerations: Qualifying for a consolidation loan can be challenging if you have significant CRA debt and a poor credit score. Additionally, while you can include CRA debt, it doesn’t necessarily reduce the total amount owed to the CRA.
  2. Consumer Proposals:
    • Inclusion of CRA Debt: Consumer proposals allow you to include CRA debt, just like other unsecured debts. A Licensed Insolvency Trustee (LIT) will help you negotiate with your creditors, including the CRA, to settle your debts for a reduced amount.
    • Advantages: Consumer proposals can significantly reduce the total amount you owe, making it a more manageable way to deal with your CRA debt. They also provide legal protection from creditor actions, including the CRA’s collection efforts.
    • Considerations: While consumer proposals offer relief, they will still affect your credit score and remain on your credit report for several years. You must also meet specific eligibility criteria to file a consumer proposal.
  3. Bankruptcy:
    • Inclusion of CRA Debt: Bankruptcy includes all unsecured debts, including CRA debt. It is often considered a last resort when other debt relief options are not feasible.
    • Advantages: Bankruptcy can provide a fresh financial start by discharging most unsecured debts, including CRA obligations. It stops wage garnishments and creditor actions, giving you a chance to rebuild your financial life.
    • Considerations: Bankruptcy has severe consequences for your credit score and financial reputation. It should only be considered when other alternatives are not viable.

Conclusion

Yes, your CRA debt can be included in a debt relief program, but the most suitable option depends on your specific financial circumstances. It’s essential to consult with financial professionals, such as Licensed Insolvency Trustees or financial advisors, to explore the most appropriate strategy for addressing your CRA debt and regaining control of your finances. Regardless of the chosen path, addressing CRA debt is crucial to prevent escalating interest and penalties while working towards a debt-free future.