Forgotten Creditor in Proposal
I filed a consumer proposal in November 2005 which was accepted by my creditors through my trustee on December 12, 2005. At the time my 2005 taxes were not completed and were not entered into the consumer proposal although I had mentioned that I would owe taxes in 2005 to the company who were looking after me. Now I filed my own 2005 taxes and have found out I owe $5100.00. I have contacted the paralegal who is looking after me who tells me and who was the one responsible for looking after the creditors and who also told me it could be done when the taxes were done. I have now contacted my trustee who tells me that it was supposed to be entered into the creditors list. My par a legal tells me that they will now file it to Rev Canada and they will submit back a claim and it will also have to be part of the amount in the proposal. My trustee(who I understand acts on behalf of my creditors) tells me it may not be accepted.
My question is “Is my para legal firm correct in telling me that when they file to Rev Canada the information, will they file a claim in the proposal and they will get first choice since they are Revenue Canada and will my creditors cause a problem with this since they will now get less or will I now be responsible for paying the $5,000.00?
Please help???
Hmmm… there are a few different issues in your entry.
1) Your 2005 taxes: since you filed before December 31 CRA (the new name of Revenue Canada) is under no obligation to include your 2005 income taxes. CRA and the trustee community agreed that in order for income taxes to be included in a proposal for the period prior to the date the proposal was filed (Jan 1 to Dec 12, 2005 in your case) a clause requesting the inclusion needed to be added to the proposal and an estimated return that covers the period needed to be filed when the proposal was submitted. If these things weren’t done then CRA does not have to include the 2005 taxes in your proposal.
That doesn’t mean that CRA won’t allow it, it simply means they don’t have to. Whether or not they do will depend on the rules and procedures in place in the local CRA office you have to deal with.
2) CRA has priority over other claims: this is only true in cases involving payroll deductions for a business. It is not true for your personal income taxes. CRA has no greater claim than any other creditor.
3) Dealing with para-legals: Frankly, I am concerned that someone presenting themselves as a para-legal is assisting you in some manner. If they work for your trustee and therefore are supervised by someone licenced (and therefore accountable) by the government it should be okay. If you are paying a para-legal directly then you are probably wasting your money.
Given that the advice the para-legal gave you about CRA is incorrect I think you should reconsider whether or not they are really helping you. You might want to go and see your trustee to discuss this further…