Does Bankruptcy Clear CRA Debt?
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Navigating financial difficulties, especially when they involve tax debt owed to the Canada Revenue Agency (CRA), can be incredibly stressful. Many individuals facing such challenges might consider bankruptcy as an option to reset their financial situation. Let's address whether bankruptcy can clear CRA debt and explore alternative solutions such as debt consolidation with Parachute.
When you declare bankruptcy in Canada, most of your debts are included in the bankruptcy estate and are subsequently discharged upon the completion of the bankruptcy process. This includes debts owed to the CRA, such as personal income taxes, GST/HST, and certain penalties and interest.
However, there are some important caveats and considerations:
The Canada Revenue Agency offers instalment payment plans, and other taxpayer relief provisions. However, the only way to actually eliminate CRA debt is by working with a Licensed Insolvency Trustee to declare bankruptcy or filing a consumer proposal.
Filing for bankruptcy will eliminate most CRA debts, but comes with other severe consequences. In general, it should be considered only as a last resort.
If you owe Revenue Canada money, it’s crucial to make payments towards this debt. The CRA has options for paying your debt in full, making a partial payment, or coming to a payment agreement which will allow you to pay in instalments. If you do not make an attempt to pay, the CRA may take legal action against you.
Declaring bankruptcy has several implications, including its impact on future tax debts. Here's an overview of what happens after declaring bankruptcy, particularly concerning tax-related aspects:
Before considering bankruptcy, it’s important to consider other options for managing debt, like debt consolidation with Parachute.
A debt consolidation loan is designed to help individuals simplify their debt repayment by combining multiple high-interest debts into a single loan with more favourable terms. The primary goal is to streamline the repayment process, making it more manageable and potentially reducing the overall cost of the debt.
At Parachute, we’re focused on building our customers’ financial health over time. Here’s what makes us unique:
By taking advantage of Parachute for debt consolidation, you can manage to pay off your CRA debt over time without the drastic step of declaring bankruptcy. You'll not only handle your tax obligations but also place yourself on a path to financial wellness, saving money, and rebuilding credit along the way.
In summary, while bankruptcy can clear some types of CRA debt, it's a solution that comes with significant drawbacks and long-term implications. As a compassionate personal finance expert at Parachute, I encourage you to explore alternatives like debt consolidation to regain financial stability without the severe consequences of bankruptcy. Consider reaching out to a financial advisor to review your personal circumstances and to see if a solution like Parachute is the right fit for you.
Remember, there's often a parachute you can deploy before considering the jump into bankruptcy.