Many people open a business to pursue the dream of being their own boss. Unfortunately, as a result of unforeseen circumstances, businesses can close and leave their owners with outstanding debt.
Fred S. was an entrepreneur who owned an incorporated company that, despite his best efforts, was unsuccessful. After considering his options, he ultimately wound down the business to focus on other financially gainful pursuits.
HST and CRA Debt Collection
Six months after closing up shop, Fred was shocked to receive a letter from the Canada Revenue Agency (CRA). CRA claimed that, as director of the insolvent company, he could be personally liable for $50,000 in unpaid HST. They gave him 30 days to provide a “due diligence” defense, or face being held liable for this amount.
In order to provide this defense, Fred would have to demonstrate that he had, in fact, paid his tax debt and owes nothing, or took reasonable steps to pay but was unable to do so. Neither of these scenarios applied to Fred, leaving him in debt to Revenue Canada.
To make matters worse, Fred had already accumulated $50,000 in personal debt as a result of the closing the business. The added burden of HST debt was financially crippling.
Heavy financial burdens can be stressful for anyone, especially when CRA collection is involved. What if he couldn’t pay? Could they garnish his wages, take his personal property, or worst of all, put him in jail?
Taking Action on Tax Debt
Instead of letting an unpleasant situation get the best of him, Fred wisely took the initiative and called Charles Advisory Services for help. After welcoming Fred into our office, we agreed to act as an agent on his behalf. Our team got to work developing a debt management solution that fit his budget and would clear up his outstanding debts as quickly as possible.
“When people come to a trustee for help,” says Robert Charles, B.A., CIRP, Licensed Insolvency Trustee. “They’re not sure what to expect. Our first priority is to make sure the client knows that we’re on their side and will take care of their needs.”
Consumer Proposal: A Debt Management Solution
Robert and his team helped Fred negotiate better payment terms for all of his outstanding debts, including his CRA debt, with a customized consumer proposal. As soon as we filed it, he immediately stopped receiving harassing phone calls and letters from creditors. When the proposal was accepted, Fred could then concentrate on making payments and rebuilding his credit history.
Since then, Fred has completed the payments under the terms of his consumer proposal, has found a new job, and is moving forward financially. With his business debt cleared up, Fred has peace of mind knowing that any further debt management help is just a phone call away.
If you’re ready to take control of your personal or business debt situation with a customized debt management solution, contact us today for a free consultation!
TIP: When you collect HST from a customer, put it in a completely separate account from your business revenue. That way, the money collected will always be available for payment and you have no unexpected debt surprises down the road.