Got CRA Debt? – Your largest asset may be at risk.
There are very few people who enjoy paying income taxes. Many people have their taxes withheld from their paycheck, so they never even have the chance to fall into arrears, but others are self-employed or work on a contract basis and so are responsible for sending in their own taxes to the CRA each year. If you’re one of those people, you know how much discipline it takes to save enough money up to make the requisite payments.
If you’ve fallen behind in your payments to the CRA, and you own a home, your largest asset is at risk. Sooner better than later is the right time to get in touch with the CRA and put together a payment plan so that they do not come after your assets. If you’ve let things run on a bit long and the CRA has already started to move against your assets, then you can ask family and friends for help, as you’d rather owe them than the CRA. You can file for bankruptcy, but that can be the kiss of death for your credit rating.
So what else can you do to keep the CRA from seizing your house? After all, they have wide powers. They can garnish your wages, freeze your accounts and seize the funds and take away your assets. If you owe back taxes, the CRA can swoop in and create a deemed trust that affects your whole property. If you owe $100,000 to the CRA and have a home valued at $500,000 with $250,000 equity, the way that a deemed trust works is that the CRA can have a $100,000 deemed trust set up that would become the senior lien on your property. So if you’re coming up on renewal for your mortgage, the lender is likely to take issue with the fact that it is no longer the senior loan if your house goes up for sale.
If you have $250,000 in equity, though, and you’re open with the bank and the CRA about your situation, you may be able to get enough of a home equity loan to pay off the debt to the CRA. This is good news. But what if your credit has staggered a bit since your last renewal? You have time to get your credit where it needs to be, but approval is not likely for your home equity loan.
This is where Amansad Financial stands ready to help people who are in trouble with the CRA but have enough equity in their homes to keep from losing their homes. The banks may not be willing to provide a loan against the equity, even though the equity is there. However, Amansad Financial has relationships with a number of private lenders who are willing to provide financing in this sort of situation. Instead of looking at your credit score, private lenders look at the loan-to-value (LTV) ratio of the property. If you have $250,000 in equity, taking out a $100,000 loan would still leave $150,000 in equity. If the house’s value is $500,000, that leaves you with 30% equity, creating an LTV ratio of 70 percent, well within the tolerances of most private lenders.
You’re going to have to pay a higher interest rate with a private loan than you would with a home equity loan from a bank, because you represent a higher credit risk than someone with a pristine credit score. However, paying that higher rate is preferable to having the CRA decide that they need to be in the first position on your mortgage. That’s a consequence that no one wants to have to deal with. The CRA has all the power in this situation. Ignoring them will not make your tax problems go away. This sort of loan can make them vanish, though.
If you are in the red to the CRA, and you don’t have any other resources other than your home equity, it’s time to talk to Amansad Financial about your options. We can connect you with our network of private lenders to help you find the loan that best suits your needs. Get in touch with us so that we can go over your current situation and make the best recommendation to help you get the CRA’s tenterhooks out of your life.
Confidential Consultation with a Trustee