Consumer Proposal Stops CRA Garnishment

Last week I met with Norman and he started the interview by saying that he had researched the matter and he knew that his only option was bankruptcy.  I told Norman that I would have to get some facts in order for us to assist with his problem. As we discussed what his assets were, and what the family income level was, a pattern has started to develop. Norman was a person who had accumulated some assets, which he did not want to lose, but had considerably more debt.

After Norman had disclosed all of his debts which he believed were eligible, I started asking some general questions. When I asked if there were any garnishees or asset seizures taking place, he replied that the Canada Revenue Agency was garnisheeing his income at the rate of 40% of his gross income and that was why he had to file for bankruptcy because he could not pay anyone else.  I explained to him that personal income tax was an unsecured creditor and a participant in both bankruptcies and consumer proposals. When he questioned the validity of the statement, I replied that I had been working in the insolvency field exclusively for nearly twenty years, and twelve of those were with the Canada Revenue Agency.  He thought taxes had to be paid, no matter what.

We then looked at what his surplus income would be and what a bankruptcy would cost on a monthly basis.  A combination of purchasing the equity in the family home and surplus income were going to make the payments higher than he expected. Then we looked at the consumer proposal.  The payments were affordable because the proposal could be extended to five years.  Norman was still apprehensive because of the garnishee that Canada Revenue has issued. I explained that the Canada Revenue Agency would have to lift the garnishee and because of the number of the creditors that he had and the fact that the Canada Revenue Agency debt was less than half of his debts, that the Canada Revenue Agency would be bound by the decision of the majority.  Norman was relieved that there was an affordable solution to his problem.

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