CRA Tax Debt Relief in Ontario
Understand your options to deal with CRA tax debt, including consumer proposals and bankruptcy
Owe Money to the CRA and Feeling Overwhelmed?
If you are behind on income tax or HST payments, you may have legal options to stop collections and reduce what you owe.
We can help you deal with your tax debt legally, confidently, and with a clear plan forward.
You deserve a fresh start
How Do I Get Rid of CRA Debt in Canada?
If you owe money to the Canada Revenue Agency and cannot afford to repay it, there are several ways to deal with tax debt depending on your financial situation.
1. CRA Payment Arrangement
The CRA may allow you to repay the full balance over time through a payment plan.
2. Consumer Proposal
A Consumer Proposal allows you to settle your debt for less than the full amount owed while making affordable monthly payments..
3. Personal Bankruptcy
Bankruptcy can eliminate most unsecured debts, including income tax debt. Speaking with a Licensed Insolvency Trustee can help determine which option may provide the best solution.
How a Consumer Proposal can Reduce CRA tax debt
A consumer proposal is a legal debt settlement process under the Bankruptcy and Insolvency Act, administered by a Licensed Insolvency Trustee. It may allow you to settle unsecured debts for less than the full amount owed and repay an agreed amount over time (up to a maximum of five years), depending on your circumstances and creditor approval.
CRA tax debt is often unsecured and may be included in a consumer proposal. If the proposal is accepted by creditors, it becomes binding after court approval, and payments are made according to the proposal terms.
If you’re dealing with CRA arrears, a Licensed Insolvency Trustee can review your tax debt, income, assets, and CRA collection status and explain whether a consumer proposal or another option may be appropriate.
A Consumer Proposal can help with CRA tax debt
A Consumer Proposal filed with a Licensed Insolvency Trustee can include CRA tax debt and allow you to repay an affordable portion of what you owe through structured monthly payments. In many cases, filing a proposal can also stop CRA collection actions such as wage garnishments and bank account freezes.
This legal solution can provide immediate relief and a clear path toward becoming debt free.
Licensed Insolvency Trustees are Trusted by the Canadian government to provide debt relief
Licensed Insolvency Trustees (LITs) are federally regulated by the (OSB) and must adhere to federal standards of practice, including the Code of Ethics for Trustees. It’s free to meet with us and learn about your debt relief options. At David Sklar & Associates, we’ll guide you through the process, handle the paperwork, and give you the tools to rebuild your financial future.
Can the CRA Garnish My Wages?
Yes. The CRA has the legal authority to garnish wages without a court order if taxes remain unpaid.
This means your employer may be required to send a portion of your paycheck directly to the CRA until the debt is paid.
Filing a Consumer Proposal or Bankruptcy can stop CRA wage garnishment immediately through a legal stay of proceedings.
Can the CRA Freeze My Bank Account?
Yes. If tax debt remains unpaid, the CRA can issue a Requirement to Pay to your bank, which allows them to freeze or withdraw funds directly from your account.
This can prevent you from accessing money needed for living expenses.
A Consumer Proposal or Bankruptcy can stop these collection actions and protect your income going forward.
Other Ways to Manage Canada Revenue Agency Debt
CRA Payment Plan
Unable to pay off your tax debt with a lump sum payment by the due date? If so, you can enter into an installment payment plan with the CRA.
The flexibility of a monthly payment plan can relieve considerable financial pressure. You can spread your payment over a set time period based on what you can afford to pay each month.
It’s crucial to remember that you’re required to repay your debt in full under an installment plan. The CRA won’t agree to any form of debt forgiveness. For this reason, hiring a debt settlement company to help you negotiate a reduced balance won’t do you any good.
CRA Payment Plan vs Consumer Proposal
CRA Payment Plan | Consumer Proposal |
|---|---|
| Full debt must be repaid | Debt may be reduced |
| Interest continues | Interest stops |
| Payments negotiated with CRA | Payments based on your income |
| Collections can resume if missed | Legal protection from creditors |
For many individuals struggling with large CRA balances, a Consumer Proposal can provide a more affordable long term solution.
Eliminate your Canada Revenue Agency tax debt by filing for personal bankruptcy
Can you clear your tax debt by filing for bankruptcy? Yes! The CRA is considered an unsecured creditor under the Bankruptcy and Insolvency Act (BIA). This means personal bankruptcy can legally discharge your tax debt—unless CRA has already placed a lien on your assets, in which case the debt is secured and must be addressed differently
Bankruptcy explained: simple, straight answers
You don’t need to be a legal or financial expert to understand bankruptcy. We’ve broken it down into easy guides that answer the questions our clients ask most often in plain language.
Repay CRA tax debt using a debt consolidation loan
A debt consolidation loan is one way some people pay CRA tax debt. It works by combining multiple debts into one monthly payment, ideally at a lower interest rate, which may make repayment more manageable.
Important: David Sklar & Associates does not offer loans or lend money. If you’re looking for a consolidation loan, you’ll need to contact your bank or another lender to find out whether you qualify and what rate you’d be offered.
That said, consolidation isn’t always a fit. If you can’t qualify for a competitive rate or if the loan requires collateral you may not save money overall. You’ll also still be responsible for repaying the full balance, and if the loan is secured (for example, against a home or vehicle), the lender may have the right to seize the secured asset if you default.
If a consolidation loan isn’t available or doesn’t improve your situation, a Licensed Insolvency Trustee can explain other options for dealing with CRA tax debt, including legal proceedings under the Bankruptcy and Insolvency Act.
Not Sure Which Option Is Right for You?
Book a free confidential consultation with one of our Licensed Insolvency Trustees. We will review your full financial situation and clearly explain your debt relief options, including whether a consumer proposal or bankruptcy is the right solution for your tax debt.
You do not have to navigate CRA pressure on your own. We can help you deal with your tax debt legally, confidently, and with a clear plan forward.
Frequently Asked Questions About CRA Debt Relief
If you owe money to the Canada Revenue Agency and cannot afford to repay it in full, there are several options available to help eliminate or manage your tax debt.
The most common solutions include:
- Setting up a CRA payment arrangement
The CRA may allow you to repay your tax debt over time through a monthly payment plan. - Filing a Consumer Proposal
A Consumer Proposal is a legal process that allows you to settle your tax debt for less than the full amount owed. It stops collection actions such as wage garnishments and bank account freezes while allowing you to repay a portion of the debt through affordable monthly payments. - Filing for Personal Bankruptcy
Bankruptcy can eliminate most types of unsecured debt, including income tax debt owed to the CRA.
Speaking with a Licensed Insolvency Trustee can help you understand which option may be best based on your financial situation.
Yes, in some situations CRA debt can be reduced or eliminated.
A Consumer Proposal allows you to negotiate with your creditors, including the CRA, to settle your debt for less than the total amount owed. Once the proposal is accepted and completed, the remaining balance is legally forgiven.
Bankruptcy can also eliminate tax debt if you are unable to repay it.
Yes. The Canada Revenue Agency has strong collection powers.
If tax debt remains unpaid, the CRA can take actions such as:
Garnishing wages directly from your employer
Freezing or seizing funds in your bank account
Registering a lien against your property
Intercepting tax refunds or government benefits
Filing a Consumer Proposal or Bankruptcy immediately stops most CRA collection actions through a legal stay of proceedings.
Yes. Income tax debt, HST debt, and other amounts owed to the CRA can be included in a Consumer Proposal.
The CRA is often one of the largest creditors in proposals and regularly accepts repayment plans when the proposal offers a reasonable settlement based on your financial situation.
If you cannot pay your tax debt, ignoring the situation can lead to increasing interest, penalties, and collection actions.
Instead, it is important to explore solutions early. Options may include:
Negotiating a payment plan
Filing a Consumer Proposal
Filing for Bankruptcy
A Licensed Insolvency Trustee can review your finances and explain the legal options available to deal with CRA debt.
CRA tax debt does not simply disappear on its own. Interest continues to accumulate until the debt is paid.
However, tax debt can be eliminated through formal debt relief solutions such as a Consumer Proposal or Bankruptcy.
In most cases, the CRA has 10 years to collect a tax debt after the last collection action. However, certain events can restart this limitation period, including payment arrangements or legal actions.
Because the rules can be complex, it is often helpful to speak with a Licensed Insolvency Trustee to understand your situation.
The CRA may allow payment arrangements, but they generally require that the full tax debt be repaid.
If you cannot afford to repay the entire amount, a Consumer Proposal may allow you to settle the debt for less while stopping CRA collection activity.
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