Meet the debtor – Proposal for personal income tax debt

Joe’s story

Joe successfully operated his business as a sole proprietor for many years.  His struggles started with the pandemic and he found he could no longer pay his personal income tax and his business and living expenses.  Paying rent and buying food were a priority, so he filed his tax returns to avoid penalties, but interest accrued on the balance owing.

His income was then further negatively impacted by advancements in Artificial Intelligence and its impact on his industry.  Canada Revenue Agency is becoming more aggressive with their collection proceedings, and the final “straw” for Joe was when they froze his bank account leaving him unable to pay any expenses.  With $90,000 owing in income tax and another $15,000 in credit card debt, that’s when he reached out to me for help.

Bankruptcy option

We reviewed his financial situation in detail and determined his business assets fell below the exemption for tools of the trade under the Execution Act in Ontario.  His only realizable asset was a second vehicle worth about $2,000.  As a single individual his income was above the threshold set by the Superintendent of Bankruptcy and thus in a bankruptcy, he would be required to make surplus income payments totaling $18,000.00.  We estimated total realizations of $20,000 in a bankruptcy.

Consumer proposal option

We then discussed offering a proposal to his creditors, reducing the total amount paid, at a monthly amount he could afford.  A proposal must offer more to your creditors than recovered in a bankruptcy and be completed in a maximum of 60 months.  Based on Joe’s capability to pay, a proposal of $27,600 payable at $460 per month with no further interest was feasible.   Canada Revenue Agency didn’t agree to the original proposal, but we were able to negotiate $500 per month for 60 months.

Joe felt comfortable with this monthly amount and was happy he had a plan in place to deal with his debt and move forward with a fresh start.

If you are struggling with personal income tax debt, reach out to me today.  There are solutions that can include amounts owing to Canada Revenue Agency.  Take the first step to your fresh start now.

Kathy Lenart