Consumer proposals and the CRA
April 23rd, 2008 by Questions
My mom is considering filing a consumer proposal. She has approximately $90,000 in total debt – including $20,000 in personal income tax and $30,000 in corporate income tax. The balance comes from a personal loan and a relatively small amount of consumer debt.
She also has $250,000 equity in a home she doesn`t live in and can`t sell (it`s actually my grandmother`s house – but ownership was unwisely transfered to my mom and her sisters many years ago – as part of an estate planning strategy). The total value of the home is $750,000 – but my mom has only one-third ownership.
I`m in a position to reduce her total debt load by paying-off her personal income tax ($20,000).
My mom has a good pension – which pays her $62,000 per year. She still works part-time, earning another $20,000 per year. Here`s the problem: The CRA is garnishing her wages to the tune of $2,000 per month (based only on the $20,000 owing in personal income tax) – which makes it difficult to meet her monthly financial obligations.
Is a consumer proposal a reasonable option in this situation? If so, should I first pitch-in and reduce her debt to an amount below $75,000?
We`re also concerned about disclosing my mom`s partial ownership of my grandmother`s house – for obvious reasons.
My mom stands to inherit a healthy sum of money in the coming years – so this will all be a moot point eventually. But in the short-term, the CRA`s collection actions make it difficult to meet her financial obligations.
So, I guess I have two questions:
1. Is a consumer proposal a reasonable solution?
2. Should I pay down her total debt to an amount below $75,000, before filing the proposal (I assume yes, if we hope to protect against bankruptcy and and danger to my grandmother`s house)?
Thanks so much for any advice you can provide.