Many entrepreneurs who are very good at their trade (roofing, drywalling, etc.) struggle with increasing tax debts to Canada Revenue Agency (“CRA”).  Due to the quality of their workmanship, they receive many referrals from prior clients and are working endless hours to service their clients.  This, unfortunately, takes time away from managing the business and record keeping and tax filings often become delinquent.  It may seem more important to pay your landlord and suppliers over CRA because you need an office to run your business and shingles to complete your projects.  CRA becomes a non-voluntary lender to fund your business at a pretty high rate of interest.

A personal bankruptcy or consumer proposal can discharge the following unsecured amounts owed to CRA:

  • Personal income tax and CPP payable;
  • HST that has been collected and not remitted to CRA; and
  • Source deductions that have been withheld from employee’s wages and not remitted to CRA.

If CRA has registered security against any of your assets (house, car, etc.) then the registered amount owing to CRA becomes like a mortgage and would still remain payable even in a personal bankruptcy.

If you have transferred assets to a family member after a debt is owed to CRA, there are provisions under the Income Tax Act and Excise Tax Act that allows CRA to assess the person who received the benefit of those assets to the lesser of the tax amount owing or the value received.

If you are struggling with amounts owing to CRA, contact Fresh Start Now to arrange a free, initial assessment to review your specific circumstances in detail.  We will explain how a personal bankruptcy or consumer proposal will resolve your tax debt issues.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)