Dentist With Over $300,000 in CRA Debt Finds a Manageable Way Forward

Dentist With Over $300,000 in CRA Debt Finds a Manageable Way Forward

K.P. approached us with more than $300,000 in CRA debt. We’ll call him K.P. to protect his privacy.

He is a dentist with a good professional income, but his financial situation told a very different story.

Nearly a decade earlier, K.P.’s marriage had broken down. What followed was a lengthy and difficult divorce. In addition to the financial cost of the divorce proceedings, the experience placed considerable strain on his personal and professional life.

Eventually, the stress became significant enough that his doctor recommended taking an extended leave from work.

Now unable to make any payments to CRA, K.P.’s tax problems continued to grow.

After getting help and taking time to recover, K.P. returned to dentistry and began working at a dental clinic. His situation was finally becoming more stable. He once again had a relatively high and predictable income.

But there was one major problem left to solve:

His CRA debt had grown to more than $300,000.

Three Very Different Ways to Deal With the Debt

When someone has significant CRA debt, simply looking at the total amount owing doesn’t tell the whole story.

We looked at the different options available to K.P. and, more importantly, what each option could mean for his monthly cash flow and his future.

The figures above are based on K.P.’s circumstances at the time. CRA interest rates and insolvency outcomes vary by period and individual circumstances.

Why Bankruptcy Wasn’t Necessarily the Best Option

At first glance, bankruptcy might seem like the obvious solution to more than $300,000 of tax debt.

But K.P.’s return to dentistry changed the equation.

Because he once again had a relatively high income, a bankruptcy would have required significant surplus income payments under the applicable government standards. These payments may also have increased during the bankruptcy process if his income increased.

His improved income was positive for his life and career, but it could make bankruptcy considerably more expensive.

A proposal offered another path.

Rather than having his payments affected by the surplus income requirements of a bankruptcy, K.P. was able to make an offer to his creditors based on a monthly payment he could realistically manage.

The proposal would take longer, but it gave him something extremely valuable:

Predictability.

He knew what he needed to pay and could build the rest of his financial life around it.

The Outcome

With his debt situation stabilized, K.P. could put his attention back where he wanted it — on his career, his children and rebuilding his personal life.

And something unexpected happened.

As his circumstances improved, K.P. was able to put more toward his proposal than originally planned.

He ultimately completed his proposal almost one full year ahead of schedule.

After nearly a decade of financial uncertainty, the CRA debt that had followed him through his divorce, leave from work and return to dentistry was finally behind him.