Arguably, April is not the happiest time of the year. Plenty of grey rainy days combined with the fact that the deadline for filing our 2016 tax returns is looming large. Some may still owe personal income tax from prior years or perhaps haven’t filed them yet because they know they likely owe more taxes. You may have stopped opening mail from the Canada Revenue Agency (CRA) some time ago. Now you’ve heard they can register a lien on your home but what does that mean?
CRA can take swift collection action
When you owe money to the CRA, they (like any creditor) will try to collect that debt from you. But the CRA has special legislated powers. 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 or vacant land). Once CRA registers 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.
Ignoring CRA means you’re putting your home at risk
Initially, 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 a lien is registered, the income tax debt will be included and discharged along with the other unsecured debt.
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. Interest on the debt continues to accrue. If CRA registers a lien before a consumer proposal or bankruptcy is filed, they will likely want to be paid in full + interest.
Take affirmative action with CRA and other excessive debt
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. Not opening your mail and ignoring the notices may seem like it helps initially but the stress returns when the next envelope arrives.
If you don’t feel comfortable negotiating with CRA or other creditors making unaffordable collection demands, 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. If for example a consumer proposal is filed, the Trustee will contact CRA and negotiate an agreement on your behalf.
The bottom line is that excessive debt is a serious matter. If you can no longer afford to keep up payments on your debt in including unpaid personal income taxes, whether CRA has already registered a lien or not, it’s important that you call a Trustee and take immediate action to prevent additional problems and unnecessary debt stress.
If you 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.