When faced with mountains of debt you can’t keep up with, you often have to choose which ones to pay and which ones must wait to be paid on another day when things get better. When confronted with unpaid debts to the CRA, Lethbridge residents are often forced to ignore them. After all, if you’re about to have your power shut off, whom are you going to pay? The Utility Company or the CRA?
But for many Canadians everywhere things are not getting better; they are getting worse. If you’ve begun learning what is involved in declaring bankruptcy in Lethbridge you know not all unsecured debt goes away. What about CRA debt?
In a bankruptcy filing the CRA becomes just another unsecured creditor. In most circumstances they have no special status that places the debt you owe them in a superior or special position over the debts you owe your other unsecured creditors. You may know there are some differences in the details of how bankruptcies are handled across the Provinces of Canada; but when it comes to CRA debt all Provinces are the same. Your CRA debt will go away, either in whole or in part. Here’s how it works.
Once you are 100% certain a personal bankruptcy filing is the best way for you to get out of debt and get a fresh financial start your bankruptcy trustee will prepare the paperwork necessary for your filing.
This paperwork includes a statement of financial affairs which demonstrates to the court that you owe more than you can pay and need relief from your debt. Each of your unsecured creditors will be listed, along with the total amount you owe them.
Once the paperwork is filed with the courts all collection activity currently underway against you will stop. So if the CRA or any other creditor is garnishing your wages, that will cease and the amount they have been withholding will be restored.
Each of your creditors, including the CRA, will file a claim against your bankruptcy “estate.” The estate is simply an escrow account set up by the trustee where funds from the seizure and sale of your non-exempt assets and possibly some of your monthly income will be deposited and later distributed amongst the creditors.
If you have significant assets and income the creditors will get a fraction of what they are owed and once you are discharged from bankruptcy the remaining amount is forgiven. You are virtually debt free.
If you have minimal assets and income the creditors will receive nothing. To determine what assets you will keep and what you might lose you need to consult with a Lethbridge trustee licensed in Alberta. Alberta laws differ substantially from other provinces in exemption allowances.
For example, while Ontario and Quebec have no exemption allowance for equity in a home, Alberta has an allowance of $40,000. However, even for residents of Ontario and Quebec and Albertans with more than $40,000 in equity, there are sometimes options to keep from losing a home.
In summary, CRA Lethbridge debt is handled the same as any other unsecured debt in a personal bankruptcy filing.
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