How to Pay Off CRA Debt

How to Pay Off CRA Debt - Source Mortgage Centre

Tax season can be an exciting time to collect a refund cheque from the government, but for some  people, it can be a challenging season of debt. The CRA can impose penalties and take legal  action to ensure the debt is paid off as quickly as possible. CRA debt can be scary, but ignoring it  will only make things worse. While debt forgiveness is not possible, there are several options  you can explore to help you manage the situation. Here are a few ways to pay off CRA debt: 

#1 Set up a Payment Arrangement  

If you can not pay off your debt in a single payment, you can contact the CRA to set up a  payment plan to make smaller regular payments towards your debt. The CRA typically gives 6- month payment plans without requiring personal financial information. To request a payment plan longer than 6 months, you will be required to provide financial information. You can use the CRA Payment Arrangement Calculator to estimate your payment plan. 

#2 Apply for Taxpayer Relief  

Under extraordinary circumstances and financial hardship, taxpayers with CRA debt can apply  for taxpayer relief provisions. While this does not decrease the principal amount owing, it can  waive penalties and interest charges. Applications are available through CRA My Account or by  completing form RC4288.  

# 3 Repay your Tax Debt using a Debt Consolidation Loan  

In some cases, setting up a payment arrangement and applying for taxpayer relief may not be sufficient. Since the CRA considers debt owed to them to be a priority, you may consider a debt consolidation loan to stay caught up on your daily expenses to accommodate your CRA debt. Debt consolidation involves taking out a larger loan to pay off smaller debts such as tax debt. If you own your home, you can refinance your mortgage to pay off high-interest debt  consolidation. 

# 4 File for a Consumer Proposal or Personal Bankruptcy  

With the help of a Licensed Insolvency Trustee, you can file a consumer proposal or personal  bankruptcy to help with large CRA debt. A consumer proposal halts all interest, penalties and  collection efforts on your debt. It can also help you consolidate all your debt into a single  monthly payment. Filing personal bankruptcy means legally declaring an inability to pay off  debt. Consumer proposals and personal bankruptcy programs should only be used as a last resort.  

Whatever the case may be, our mortgage and lending experts at Source Mortgage Center are here  to work with you to find the best solution for managing your debt. We understand that CRA debt  can happen to anyone and we can help you get back on your feet! Reach out to us today! 

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