Solutions to Clear Canada Revenue Agency and Other Government Debts

If you find yourself owing money for consumer debts such as credit card bills, lines of credit, overdrafts, or payday loans, there are several debt management options available to you. These can include consolidation loans, Consumer Proposals or even bankruptcy. However, when it comes to government debts and money owing to Canada Revenue Agency the situation is a bit different. There are only two debt solutions that can reduce these balances and have these debts forgiven – a Consumer Proposal or personal bankruptcy.

Many people are surprised to learn that you can work with a Licensed Insolvency Trustee to declare bankruptcy or file a Consumer Proposal that can include government and Canada Revenue Agency-related debts. This is due to the specialized qualifications and regulation of Licensed Insolvency Trustees, giving them the unique ability to help you access solutions available under Canada’s Bankruptcy and Insolvency Act.

Read on to learn more about common Canada Revenue Agency and government debts that can be cleared using these debt resolution methods.

Canada Revenue Agency Tax Debt

Outstanding debts you have with Canada Revenue Agency (“CRA”) can be forgiven in a personal bankruptcy or consolidated in a Consumer Proposal. This includes balances due for personal income taxes, business GST or PST, as well as corresponding interest and penalties. All accruing interest is halted, as are wage garnishments and/or bank account seizures that may already be in place.

• If you are carrying CRA debt it’s important to understand that interest and penalties can compound very quickly, making even a small initial balance difficult to pay off. CRA is also a powerful creditor who often acts rigorously to recover debts. An unpaid debt to CRA can trigger aggressive garnishments, which could include wage and asset seizures, virtually overnight.
• Furthermore, unlike many other types of debts, these government debts are not confined by BC’s Statute of Limitations, meaning that they do not expire and you cannot “wait them out”.

Declaring bankruptcy in Canada can permanently write-off CRA tax debt and, other than filing for bankruptcy, making a Consumer Proposal is the only method that can be used to legally negotiate a reduced balance owing with CRA:

• Filing a Consumer Proposal with the help of a Licensed Insolvency Trustee can consolidate and reduce your CRA tax debt down to what you can afford to repay, with the remaining balance being forgiven.
• Consumer Proposals are an interest-free consolidation option, and you do not need to be behind in any of your bills to qualify.

Canada Emergency Response Benefit (CERB) Debt

Since 2020, consumers and business owners across Canada have been notified that they are being required to repay Canada Emergency Response (“CERB”) benefits they previously received. CRA’s collection methods for CERB debts may range from keeping your tax refunds and GST credits, to garnishing your income.

If you are unsuccessful in negotiating a repayment schedule with Canada Revenue Agency or can’t afford to repay your CERB benefits as CRA is requiring, you may consider one of the following options to clear your CERB debts:

• Filing for personal bankruptcy, which can allow you to have your CERB debt forgiven (along with virtually any other debts you may have), or;
• Making a Consumer Proposal so you can consolidate and cut CERB debt and other debts you have down to what you can afford to repay over a period of up to five years, with no interest or additional penalties.

A local Licensed Insolvency Trustee can help you understand your situation and explore all your options together during a free, confidential debt consultation. 

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Medical Services Plan (MSP) Debt

BC MSP premiums were eliminated January 1, 2020, however, if you were required to pay MSP premiums and still have an unpaid balance, this remains payable and collection actions on overdue accounts may still be taken.

MSP premiums were based on your previous years’ income tax returns. If you were behind in tax filings this may have resulted in you being ineligible for premium assistance and charged the full premium amounts. MSP’s Retroactive Premium Assistance provides adjustments for previous premiums and may be available to help reduce your balance.

• Regardless of premium assistance standings, both your outstanding MSP balance and any compounding monthly interest charges can be eliminated and written-off through filing a bankruptcy or Consumer Proposal in BC.

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Five stars for Sands & Associates! I received excellent service from this team. My trustee, Julie Medeiros, provided outstanding support and made the entire process smooth and manageable. I also greatly appreciated the financial courses led by Rabiya Sharda, which were highly educational and practical. Thank you both for your professionalism and dedication. I highly recommend their team to anyone needing financial guidance! – Waleed Al-sallami – 3 days ago 

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– Paulette Edin

Extremely helpful and knowledgeable. It was a stress free process and they even did my income taxes!
Make sure to ask for Omar! – Paulette Edin – 3 days ago 

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– Amanda Floreano

I wanted to update a previous review I had left! I am now approx. 1 year into working with the team at Sands & Associates, and I could not be happier with my decision to choose them. While I feel a huge weight lifted off my shoulders, I have been receiving guidance throughout the process that has been extremely helpful. Thank you team! – Amanda Floreano – 3 days ago 

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– Brie Sinclair

Such a great experience with Sands & Associates, Annie was beyond helpful with the whole process making it smooth and stress free! Thanks so much Annie and team for all your help! – Brie Sinclair – 3 days ago 

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– Arian Camingawan

S&A personnel Michelle was very accommodating all throughout the process of my application. She’s very patience and have given me time to think and understand what are the things that needs to be done for my application.She’s very knowledgeable on what actions that needs to be done or what are my options that would be nice for me.
She’s approachable and can answer my questions well.

Thank you so much S&A

Thank you Michelle – Arian Camingawan – 3 days ago 

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– Araz Pro

Very professional firm . They helped me with my proposal. Very satisfied 🙏 – Araz Pro – 3 days ago 

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– Kristal Quintana

I was very stressed about my financial situation before contacting Sands & Associates. I couldn’t sleep and felt overwhelmed because I didn’t know how to fix my problem.

When I found Sands & Associates, Jennifer Thom helped guide me through my consumer proposal. She was very patient, professional, and always willing to answer my questions. Even when my work schedule made it difficult to attend meetings, she was very understanding and accommodating.

Jennifer made me feel comfortable and relieved during every meeting. I’m very grateful for her support and help throughout the process.

I highly recommend Sands & Associates, especially Jennifer Thom, to anyone who needs help with their financial situation. They are professional, supportive, and easy to contact. – Kristal Quintana – 3 days ago 

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Employment Insurance (EI) Debt

An overpayment of Employment Insurance benefits can occur from causes such as application and reporting errors, or decisions made regarding eligibility. The Canada Revenue Agency provides collection services for money owed for EI overpayments and if you are unable to repay the balance you may be subject to the same consequences that CRA takes for collecting tax debts.

• Income garnishments as well as asset liens and seizures by CRA can occur if an EI overpayment is not repaid.
• You could also expect to have tax refunds and/or personal GST credits you were otherwise anticipating be withheld by the CRA and applied to your balance owing.

A Consumer Proposal or bankruptcy are solutions to stop collections on an EI overpayment. There are some complexities to understand in these situations and a Licensed Insolvency Trustee will explain the ins and outs as they relate to your specific circumstances.

Social Assistance Overpayment Debts

Provincially governed, social assistance overpayment debts are treated the same as standard consumer debts and may be forgiven under a bankruptcy or restructured using a Consumer Proposal.

Student Loan Debts

Whether your student loans are private, provincial or federal, these debts and related interest charges can also be part of the debts included in a personal bankruptcy or Consumer Proposal filed in BC. Two key considerations that determine how your student loans are ultimately resolved depend on the date your studies ended, as well as the type of student loans you have.

• If more than seven years have passed since your last study date, you can be released from your government student loans using a bankruptcy or Consumer Proposal.
• In the event you have not been out of school for seven years you would get relief from making payments on government student loans during the period that your bankruptcy or Consumer Proposal is active. Once your bankruptcy or Consumer Proposal is finished you would then begin repaying these surviving debt balances (less any amounts received through your Consumer Proposal) and any accumulated interest.
  • Some people continue making payments on their surviving student loans even while their bankruptcy or Consumer Proposal is in progress – this is your choice.
• If at least five years have passed since you last attended school, it may be possible for you to apply under a hardship provision to BC court to have your government student loans discharged like all other debts included in your bankruptcy or Consumer Proposal.
  • Under this provision your student loans may be released where you can satisfy the court that you acted in good faith in your obligation to repay your student loans, and you have experienced, and will continue to experience, financial difficulties that would prevent you from repaying these debts.
• Private (i.e. bank-held) student loans and other student financing debts will be treated as any other type of general consumer debt (such as a credit card) and can be eliminated in both a bankruptcy or Consumer Proposal.

In situations where your recent government student loans only form part of your overall debts, declaring bankruptcy or making a Consumer Proposal can still be beneficial debt relief options since all your other debts (tax debt, credit cards, overdrafts, etc.) may be wiped out, making the surviving student loans much more manageable.

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ICBC Debt 

ICBC debts may be categorized in different ways such as claims, “motor vehicle indebtedness” including outstanding AutoPlan insurance payments or unpaid Driver Penalty Point Premiums, Driver Risk Premiums, unpaid fines for offences, or motor vehicle related offences under the Criminal Code such as unpaid speeding tickets.

A Licensed Insolvency Trustee can help you investigate the type of ICBC debt you have and give you clarity as to how each debt may be dealt with if you decide to make a Consumer Proposal or file bankruptcy – both of these options can result in ICBC debt forgiveness or having the overall balance cut significantly.

• Most ICBC debts will be forgiven under a Consumer Proposal or bankruptcy – even in a motor vehicle accident where you are found to be at fault and ICBC pays a settlement to another party, you may still be able to get relief from the resulting debt.

There could be portions of your overall balance owing to ICBC that fall into categories of debts that could survive a Consumer Proposal or bankruptcy. If your Licensed Insolvency Trustee suspects this may be the case, they will (with your permission) communicate with ICBC directly to clarify how a debt is categorized and determine any portion that might survive before you commence your debt relief process.

In some cases, temporary restrictions may be placed by ICBC, such as:

• Temporary denial of license, insurance renewal or subsequent license plates. During the period of your bankruptcy prior to your discharge ICBC may retain their right to prevent you from licensing or insurance (generally renewals). Some of the criteria by which ICBC may review your individual circumstances includes:
  • The circumstances under which the debt arose.
  • Whether your ICBC debt was a significant portion of your overall debt load.
  • Hardships that may result from the refusal of these renewals.
  • The impact of a refusal on your employment, education, or ability to obtain medical treatment.
    • In situations where your employment is dependent on you holding a driver’s license, your employer may be able to write an official letter to ICBC stating such – this may result in a reversal of ICBC’s decision.
  • Temporary denial of access to AutoPlan monthly insurance payments, resulting in you needing to renew insurance in prepaid 3, 6 or 12-month increments.

ICBC generally will not refuse licenses and insurance after your eligible debts have been discharged through your bankruptcy, or your Consumer Proposal has been accepted by your creditors.

Does Including Government Debts in a Bankruptcy or Consumer Proposal Mean I Can’t Access Future Benefits?

Even if you declare bankruptcy or make a Consumer Proposal to eliminate Canada Revenue Agency or other government debt, you will not be prevented from receiving future government benefits.

Your eligibility for EI benefits, emergency benefits, housing benefits, pensions and more will not be impacted by a prior government debt being included in or written-off as part of your bankruptcy or Consumer Proposal.

Get Debt Advice and Relief in BC

Facing any type of unmanageable debt can be overwhelming and stressful, and while some types of debts are simple to resolve, others involve complex and ever-changing bodies of law.

It’s essential that you get the facts about and options for your specific situation as soon as possible if you are struggling with debt. The best course of action is to contact a local Licensed Insolvency Trustee to safely get accurate advice.

• Licensed Insolvency Trustees are the only Canadian professionals legally able to provide debt solutions that work with virtually all creditors.
• Consultations with Sands & Associates’ professionals are always free, confidential – and at no obligation.

Stop debt-stress and get a plan to be debt-free today. Book your free confidential debt consultation to connect with a caring non-judgmental BC Licensed Insolvency Trustee. 

This content is not intended to be specific legal advice; it is intended to be a simple guide in layman’s language to provide a basic overview only. E. Sands & Associates Inc accepts no responsibility for its use other than as intended. The law is an ever-changing body of statutes and decisions, and the reader is advised to seek counsel for specific matters relating to their situation.