Your Path to Debt Freedom
Since we are well into tax season, we have dedicated several posts over the last few weeks to covering various aspects of dealing with a tax debt. So far we’ve covered the various penalties and interest as well as wage garnishments and frozen bank accounts, and so we’d be remiss not to cover the third type of enforcement action utilized by the Canada Revenue Agency (CRA): a CRA lien on property.
CRA uses property liens as an effective way to collect on an outstanding tax debt. When you owe CRA money, CRA will leverage all of its available options to collect, including placing a lien on your home.
Why is a CRA lien on property such a big deal? As soon as a property lien is in place, CRA becomes a secured creditor in a bankruptcy or consumer proposal, meaning you have less negotiating power. A property lien can cause your mortgage holders to question your level of risk and whether or not to renew your mortgage, interfering with your ability to refinance your home. Furthermore, if the tax debt is greater than your property equity, and you’re planning to sell in the near future, this will result in you not having any money left to cover the transaction fees (i.e. legal and real estate fees). This could make that long-dreamt of move an impossibility.
A CRA lien on property can be difficult to deal with.
Does this mean you’ve lost title to your home? No, title remains in your name. A lien is actually a registration on the title of the property which prevents you from selling or refinancing that property until the tax debt owing is paid in full.
How can CRA find out what you own? It’s simple. Land records are electronic and anyone, including CRA, can simply run a search to find out what properties are in your name.
The most important thing to do if you are under threat of a property lien, or if a lien is already in place, is to contact a professional for advice on how to deal with your tax debt before a lien is put in place. If you can deal with the tax debt before a lien is in place you have more options.
Having a tax debt hanging over your head can be stressful. As you can see, it isn’t something you can ignore as the repercussions can be quite severe.
If you’re concerned about a CRA lien on property, get in touch with the professionals at Spergel today – we can help you sort out your finances and deal with your tax debt.
Find out more by visiting www.spergel.ca or call 310-4321.