What Licensed Insolvency Trustees Can Do for a CRA Frozen Account
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- 1 CRA Frozen Account Solutions Offered by Licensed Insolvency Trustees
- 1.1 What are Licensed Insolvency Trustees?
- 1.2 How to Free a CRA Frozen Account
- 1.3 What Are Bankruptcy and Consumer Proposal?
- 1.4 Debt Settlement Resources & Articles
- 1.5 Using a Trustee for Bankruptcy & Debt Relief
- 1.6 RRSP and Bankruptcy Details You Need to Know
- 1.7 Retail Bankruptcies Increase Due to COVID-19 Pandemic
- 1.8 Contact Us
CRA Frozen Account Solutions Offered by Licensed Insolvency Trustees
If you owe taxes to the Canada Revenue Agency (CRA), and you do not pay them or make a payment arrangement with the agency, the CRA can take very serious collection action against you. One potential action is to freeze your bank account. If this happens, not only will you not be able to access the money in your account, but the agency will direct the bank to send this money to the CRA to pay off your tax bill.
Obviously, this is not a situation that anyone wants to be in. If you are dealing with a CRA frozen account or in a position where you believe the CRA is about to take action against you, Licensed Insolvency Trustees can help.
What are Licensed Insolvency Trustees?
Licensed Insolvency Trustees (LITs) are professionals who have received specific training and who are licensed by the federal Office of the Superintendent of Bankruptcy to provide debt relief information and administer certain insolvency processes.
When you meet with a trustee, they will review your situation and give you information on the debt relief options available to you. If you, for example, are unable to pay the tax debt you owe to the CRA, Licensed Insolvency Trustees can give you details to help you solve this problem.
How to Free a CRA Frozen Account
In most cases, the CRA won’t free a bank account that has been frozen until your tax debt has been paid. When it wishes to freeze an account, it sends a Requirement to Pay notice to the financial institution, which has no choice but to comply. The notice states that access to the account must be frozen and that funds in the account must be sent to the CRA until the tax debt is paid or the bank receives legal notice to unfreeze the account.
If this happens, there are only a few options to resolve the situation:
- Open a new bank account at a different financial institution
- When the CRA sends out a Requirement to Pay notice, it typically sends the notice to any banks or financial institutions that it knows you use. However, if you have an account that the CRA is unaware of, or if you open a new account, you may be able to use this account in the short-term.
- However, opening a new account tends to be a temporary situation as the CRA will likely become aware of what you’ve done.
- Opening a new account does nothing to unfreeze the frozen account.
- Pay your tax debt or negotiate a payment plan with the CRA
- The most straightforward way to free a CRA frozen account is to pay your tax debt. However, since you’re in a position where your bank account has been frozen, there’s a good chance that you aren’t able to afford to pay what you owe.
- If you can’t pay everything you owe at once, you can try to negotiate a payment arrangement with the CRA to pay your taxes in monthly payments.
- However, the CRA is very difficult to negotiate with and if you owe a lot of money to the CRA, you may not be able to afford to pay it even in monthly portions. The CRA will never accept a payment plan that sees it receive less than the full amount owing.
- Get help from Licensed Insolvency Trustees
- While the CRA will never accept less than is owed to it, tax debts can be discharged in a bankruptcy. Also, if you file a consumer proposal, you can include your tax debt and potentially pay only a portion of what you owe.
- Only Licensed Insolvency Trustees can administer bankruptcy and consumer proposal processes.
What Are Bankruptcy and Consumer Proposal?
Both bankruptcy and consumer proposals are legal processes that are designed to help people reduce or eliminate their debts and begin the process of rebuilding their financial lives. Licensed Insolvency Trustees can help you understand these processes and administer them if you choose to proceed.
- In bankruptcy, most of your unsecured debts are eliminated and you are given a chance to rebuild your financial life free of these debts. Depending on your situation, you may lose some assets and/or be required to make monthly payments as a part of your bankruptcy. A trustee can give you information on how filing for bankruptcy will affect you before you make the decision to file.
- In a consumer proposal, the trustee determines what a fair offer to your creditors will be. This offer is then sent to all your unsecured creditors who will vote on whether to accept it. If those creditors that are owed the majority of the debt choose to accept, then all your unsecured creditors are bound by the proposal terms. The result is that you will likely pay only a portion of what you owe.
When you file a consumer proposal or bankruptcy, not only do you begin to solve your debt issues, but any legal action that has been taken against you must stop. This includes the actions of the CRA. If your bank account has been frozen, it will be freed.
This is how Licensed Insolvency Trustees resolve CRA frozen account issues and help people solve their debt problems. Most Licensed Insolvency Trustees offer a free consultation.
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