CRA sending debt letters? Here’s what you should do

Posted on 13 October 2023

Written by Colin Boulton

We understand how it can feel when you receive threatening letters from the Canada Revenue Agency (CRA), or any creditor for that matter. The CRA is a particularly intimidating creditor, primarily because of the actions they can take if they do not receive their repayments promptly. Unlike other creditors in Canada, the CRA can pursue legal action including freezing your bank account, or even a wage garnishment to dock your pay cheque at source. Where other creditors need to obtain a court order before pursuing any of these actions, the CRA does not, meaning it can move ahead quickly and sometimes unexpectedly. So, are the CRA sending debt letters to you? In this article, we explain why you may be receiving debt letters and how to act if you have received them.

Why is the CRA sending debt letters?

The CRA will generally only send you letters if you owe money you have not yet paid. Typically, this will refer to tax debt payments that may be owed. It is pretty common for many Canadians to run into some kind of tax debt at some point in our lives. Thankfully, there are ways to settle your tax debts, which we will cover in more detail later in this article. Tax debt is taken seriously, and the CRA has the power to make collection calls and take measures to seize the money that they are owed. This can include the following actions:

When the CRA begins to take action, it will likely not stop unless you file a legal form of debt relief that will offer you protection from your creditors. It is important to consider how these consequences could impact your life. Could you operate without a bank account, for instance? Would you be stuck if your paycheque was reduced each month? This will determine how quickly you will need to act in gaining tax debt relief and stopping the CRA contacting you. At Spergel, we have been helping Canadians gain tax debt relief for over thirty years, and we are here to help you too.

What if my letters are referring to CERB repayment?

During lockdown in the midst of the pandemic, many Canadians were unable to work or had their employment hours dramatically reduced. This forced the Canadian government to act quickly in delivering the Canada Emergency Response Benefit (or CERB). In fact, $81.6 billion in benefits was given to nearly 9 million people across the country. Thousands of Canadians received CERB without knowingly meeting the eligibility criteria due to the expedition with which the government tried to roll out the benefit. For this reason, the CRA is now issuing a notice of redetermination to those who may have not been eligible for the benefit. This means that many Canadians owe a CERB repayment, which may be why the CRA is sending debt letters. Each week, we are speaking to many individuals who are struggling to afford to make their CERB repayment, given that it is an unexpected bill. We understand how stressful the situation can be, but thankfully there are plenty of debt relief solutions available to those who need one. It is helpful first to meet with an experienced Licensed Insolvency Trustee who can review your financial circumstances and recommend the most appropriate pathway to financial freedom for you.

What should I do if the CRA is sending debt letters?

Keeping an open and honest line of communication is key. If you are able to afford your tax debt or CERB repayment in full, you should pay it off as quickly as you can. If you are struggling to make your payments, the CRA is more likely to take a sympathetic approach and help you to coordinate a repayment plan if you contact them ahead of missing the deadlines for which you owe money. You should contact them immediately to let them know your circumstances, and try to work with them on a reasonable repayment plan. Be careful, however, to ensure they do not push you into paying back more than you can reasonably afford. You may have other debts that you owe, while the CRA is only ever going to be mindful of the debt that you owe them. Agreeing to an unrealistic plan can get you into further trouble. If you are having difficulties making payments to the CRA, you should contact a Licensed Insolvency Trustee for a free consultation. They are the only professionals in Canada legally able to file all forms of debt relief. They will review your financial situation and recommend the best pathway to debt relief for you and your situation.

How can I clear my debt to the CRA?

Thankfully, there are plenty of ways you can clear any debt owed to the CRA, some of which will also stop the CRA sending debt letters. The Office of the Superintendent of Bankruptcy (OSB) recently confirmed that CERB repayment is a releasable debt in insolvency. In short, this means that CERB repayment can be written off when filed as part of the two legal forms of debt relief – bankruptcy and a consumer proposal. Here are primary forms of debt relief by which you can clear your debt to the CRA, be it tax debt or CERB repayment:

  • Paying off your debt in full if you have the funds
  • Making a fairness application to the CRA to reduce or eliminate the interest and penalties associated with your debt
  • Organizing a voluntary repayment plan with the CRA to reduce your payments or spread them across a longer period of time
  • Taking out a debt consolidation loan to condense all your debts into one for simplified payments and often at a lower interest rate
  • Filing a consumer proposal (a popular bankruptcy alternative) to keep your assets and reduce your debt by up to 80%
  • Filing bankruptcy to clear either your tax debt or CERB repayment. In most cases, you can be discharged from bankruptcy in as little as nine months.

What are the consequences of not handling debt letters from the CRA?

You might be surprised to learn that the CRA will want to help you. At the end of the day, if they can work with you and find an agreeable arrangement, they stand more likelihood of receiving back the funds they are owed. Where CERB is concerned, there is an understanding around the fact that a number of Canadians would be ineligible, and so they are treating the matter with some leniency when it comes to repayments. Although it might seem intimidating, the CRA may be willing to work with you on repayment options. They should understand that it can be challenging to have to repay unexpected debts. In order to avoid consequences, you should simply follow the instructions in your communications from the CRA promptly. If you feel nervous, and do not know what to expect, book a free, no-obligation consultation with one of our experienced Licensed Insolvency Trustees at Spergel. We can help to answer your questions, as well as any concerns you might have regarding the CRA sending debt letters. We can also help you to understand your debt relief options, should you feel that you need a reduction or elimination of your debt altogether. We treat every individual we speak to with compassion and understanding – we are here to help you, just like we’ve helped over 100,000 Canadians gain debt relief.

How do I stop the CRA sending debt letters?

CRA sending debt letters? This is because you owe outstanding debts to them, be it tax debt or CERB repayment. There are three primary ways you can stop them from sending debt letters. Firstly, you can pay off your debt in full. Otherwise, you will need to file either a consumer proposal or bankruptcy. Only these legal methods of debt relief will prevent the CRA from contacting you or pursuing consequences against you. This is because both of these methods of debt relief automatically generate a stay of proceedings. This offers you full protection from your creditors. Given that part of the stress of owing tax debt or CERB repayment is the pressure of the CRA’s collection powers, filing a form of debt relief can really put your mind at ease.

Does the CRA send text messages?

This is a common question, and it is really important to be wary of CRA scam alerts. Unfortunately, there are a number of individuals who attempt to scam vulnerable Canadians by impersonating the CRA. If you suspect that you might have received fraudulent text messages, it is a good idea to reach out to the CRA to confirm that the communications you received were genuinely from them.

At Spergel, we understand how stressful it can be when the CRA are sending debt letters. If you are wondering how to clear your tax debt or CERB repayment, you should book a free consultation with a reputable Licensed Insolvency Trustee. At Spergel, we have been helping Canadians get out of debt for over thirty years, and we can help you too. We will get you on the pathway to financial freedom as quickly as feasibly possible.

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Colin Boulton

Colin Boulton is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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