CRA Liens on House and Bankruptcy


I am currently bankrupt and have not been discharged yet. The CRA has 2 liens on my house totaling $65K. One lien is for income tax the other for GST. I can get a second mortgage for only $30K and I have a representative who is telling me they can negotiate the removal of both liens for this amount based on legislation that is in place. They said the following :

“what ensures the success of the settlement which I have discussed with you is not a particular document but rather a Federally Legislated Bankruptcy Act. The CRA is compelled by that act to collect only the amount supported by your equity and no more. Your court officer will confirm it. Hence my confidence in accomplishing the objective as indicated”

However, I can not find any supporting documentation that explains this and my lender is getting cold feet because they are in doubt that both liens will be removed. Is the statement by my advisor correct and if so how do I get supporting documentation to give my lender? The advisor seem to not be able to provide me with a reference to supporting documentation which worries me a bit. Can someone help me better understand my situation and provide me with the necessary reference to satisfy my lender about my CRA liens on house and bankruptcy?

Posted from: Ontario

One Response to “CRA Liens on House and Bankruptcy”

A licensed trustee said...

Speak directly to your trustee, not your debt advisor.

A tax lien changes the tax debt into a mortgage of sorts secured against your home. As such it is outside the normal operations of the Bankruptcy Act, but CRA will remove the lien as part of the bankruptcy if they are paid an amount equal to the equity in your home at the time you filed. The remainder of the tax debt becomes unsecured and written off with the bankruptcy.
Before you borrow make sure you have a deal in place with CRA. There is no point borrowing $30,000 if CRA wants $40,000.