You are not in a happy place because its tax time once again. Not only do you have to get all of your information together for your 2015 tax return but in the back of your mind, you know that you still owe income taxes from prior years. You stopped opening any mail you receive from the Canada Revenue Agency (CRA) some time ago. Now you’ve heard they can register a lien your home but what does that mean?
When you owe money to the CRA, they (like any creditor) will try to collect that debt from you. But the CRA is not like other creditors in that it doesn’t need to give you a head’s up before it takes formal action. The CRA can seize your bank account and garnish your wages without giving you prior notice. Without taking you to court, the CRA can register a lien on your home or other property (such as a cottage). Once they register a lien, they are a secured creditor on the same footing as a bank that holds a mortgage. Best to take matters in hand before you get this far down the road.
You’re helping the CRA by not doing anything
Personal income tax debt is on the same footing as credit card, personal loan and all unsecured debt. If you were to file a consumer proposal or bankruptcy before the lien is registered, the debt can be compromised and discharged as unsecured.
Once the CRA registers a lien on your property, they improve to a secured creditor ranking. You have improved their ranking. Why is that important? Once the CRA registers a lien on a property, they have a right to be paid from the proceeds of sale when the property is eventually sold. If they register a lien before a consumer proposal or bankruptcy is filed, they will want to be paid in full + interest.
Timing is everything
The best way to avoid a tax lien is to answer when CRA calls or sends notices. Unlike a credit card company, the CRA doesn’t send monthly statements to remind you of the debt. Ignoring the notices may seem like it helps initially but the stress returns when the next notice arrives.
If you don’t feel comfortable negotiating with CRA or other creditors that may be making similar demands for you to pay, it’s time to ask for help. Pick up the phone and contact a trusted and experienced Licensed Insolvency Trustee. They will take stock of your situation and develop a plan that fits your budget. Once a formal plan is in place, they will negotiate directly with CRA on your behalf.
The bottom line is that tax arrears are serious. If you have unpaid taxes, whether or not you already have a CRA lien in place against your home, it’s important that you take immediate action to prevent additional problems and unnecessary debt stress.
If you need help with your plan or are burdened with debt stress, asking for sound advice is a sign of strength and the smart thing to do. Asking sooner rather than later is always better. Call Doyle Salewski today for your free, no obligation consultation. You’ll be glad you did.