There are many different types of debts AND debt solutions available to Canadians, and not all are created equal. Notwithstanding the appearance of a large number of debt resolution options, there are only two legislated debt options that will give a person relief from their debts, including government-related debts. Here are some common types of government debts that many people are surprised to learn that a bankruptcy or Consumer Proposal can deal with:
Income tax debt – Outstanding debts with Canada Revenue Agency (CRA) can be included in a personal bankruptcy or a Consumer Proposal. This includes balances due for personal income tax, GST or corporate tax, as well as corresponding interest and penalties. All accruing interest is halted, as are wage garnishments or bank account seizures that may be in place.
Did you know? A Consumer Proposal is the only method that can be used to negotiate a reduced balance owing with CRA.
Student loans – If more than seven years have passed since your last study date, you can be released from your student loans using a bankruptcy or Consumer Proposal. Even if you have not been out of school for seven years you would still get relief from making payment on those student loans during the bankruptcy or Consumer Proposal period.
Did you know? If only 5 years have passed since you last attended school, it may be possible to apply for your student loan to be relieved under a hardship provision following your bankruptcy.
Medical Service Plan (MSP) – If you were required to pay MSP premiums and incurred an outstanding balance, this will be eliminated with a bankruptcy or Consumer Proposal. Ongoing premiums (if any) would then resume as normal after the date of filing.
Did you know? MSP premiums are based on your previous years’ tax returns. If you’re behind in tax filings this may result in not being eligible for premium assistance.
If you’re facing an unmanageable balance owing from the provincial or federal government of Canada it’s important to find out the facts about your situation as soon as possible. Interest and penalties can compound very quickly and the CRA can be a powerful creditor.
Contact a Licensed Insolvency Trustee if you have questions about how to manage these, and other types of debts. Licensed Insolvency Trustees are the only professionals legally able to provide debt solutions to work with these creditors on your behalf. Consultations are always free, confidential – and at no obligation!
Ready to talk? Contact us today to arrange for a free, confidential consultation in one of our BC locations.