Does a Consumer Proposal Cover Tax Debt?

Tax debt is one of the most stressful types of debt for Manitoba residents. Owing money to the Canada Revenue Agency (CRA) can lead to garnished wages, frozen bank accounts, and penalties. The good news? A consumer proposal can often help.

Here’s what you need to know:

1. Most Tax Debts Are Eligible

Consumer proposals can include income tax debt, GST/HST owing, and penalties and interest from the CRA.

2. The CRA Is Legally Bound to the Proposal

Once a consumer proposal is filed and accepted, the CRA must abide by the terms—just like any other creditor. Collections stop, interest freezes, and you’re protected from further enforcement.

3. Proposal Must Be Reasonable

To get CRA approval, the proposal must offer a fair repayment amount based on your financial situation. CRA evaluates your income, expenses, and assets just like other creditors.

4. Timing Matters

The sooner you address your tax debt, the better. If CRA has already begun legal action (like garnishing wages or freezing accounts), filing a consumer proposal immediately stops those actions.

5. What’s Not Included?

Consumer proposals don’t eliminate:

• Student loans less than 7 years old
  
• Child or spousal support payments
  
• Court-ordered fines or penalties
  

Real-Life Winnipeg Example:

A self-employed contractor in Winnipeg owed $48,000 to CRA, including late filing penalties and interest. With the help of Lazer Grant, he filed a consumer proposal, reduced his repayment to $22,000, and regained financial stability.

Final Thoughts:

Yes—your tax debt can often be included in a consumer proposal. This legal solution can make even the most intimidating CRA obligations manageable.

If tax debt is keeping you up at night, contact the Licensed Insolvency Trustees at Lazer Grant in Winnipeg. We’ll help you deal with the CRA and create a path toward financial peace of mind.

Book your free consultation today and get tax relief you can trust.