Quick answer: Yes, the CRA accepts consumer proposals in Canada when your offer meets their standards for repayment, compliance, and fairness compared with bankruptcy.
Wondering how the Canada Revenue Agency (CRA) approaches consumer proposals?
This guide gives you a clear look at which tax debts can be included, how the CRA reviews and votes on your offer, and the role your Licensed Insolvency Trustee (LIT) plays throughout the process.
You’ll also see why proposals are sometimes challenged, what happens once one is accepted, and the steps that can help you move forward if the CRA asks for changes.
Jump to:
- Does the CRA accept consumer proposals?
- Which CRA debt qualifies for a consumer proposal?
- How does the CRA vote on a consumer proposal?
- Why would the CRA reject a consumer proposal?
- How is your tax debt treated once the CRA accepts?
- Example scenarios: How the CRA accepts and treats consumer proposals
- What do you do if the CRA rejects a consumer proposal?
- Common misconceptions about the CRA and consumer proposals
Does the CRA accept consumer proposals?
Yes, the CRA accepts consumer proposals in Canada, but only when the offer meets the agency’s standards for repayment and compliance.
When your LIT files the proposal, the CRA reviews your full tax balance, your repayment offer, and whether all returns are filed.
They usually agree to terms that provide a better return than bankruptcy and show a realistic ability to pay over time.
If your offer meets these tests and supports a stronger repayment outcome, the CRA is far more likely to agree.
This allows the proposal to move forward and helping you bring tax arrears under control.
Speak to a member of the Harris & Partners team or visit the OSB page on Canada.ca to understand more about consumer proposals in Canada.
Which CRA debt qualifies for a consumer proposal?
Examples of CRA debt that qualify for a consumer proposal include:
- Personal income tax arrears from previous years.
- GST/HST obligations for self-employed individuals and small business owners.
- Payroll remittances and source deductions for employers.
- Penalties and accrued interest tied to these debts
Your Licensed Insolvency Trustee will confirm which debts fit and make sure your file is complete before the offer is sent, giving the CRA what it needs to assess your repayment plan.
The CRA will only review a proposal when every outstanding return is submitted, as compliance is the starting point for any tax-related negotiation.
In other words, the CRA will not consider a proposal if you have unfiled taxes.
What CRA debts don’t qualify for consumer proposals?
Some CRA-related debts won’t be accepted for a consumer proposal, including:
- Fraud-related tax debts or those involving misrepresentation.
- Outstanding returns not yet filed
- Recent tax obligations not yet assessed
How does the CRA vote on a consumer proposal?
The CRA doesn’t automatically approve every consumer proposal it votes on as a creditor, just like banks, credit card companies, and loan providers.
However, because the CRA often holds a majority share of total debt in tax-heavy cases, its vote can determine the outcome.
What is the CRA’s approval process?
Once your consumer proposal is filed with the CRA, they review the following:
- Your total tax debt and how much is being offered for repayment.
- Your income and ability to pay over the proposal term.
- Your compliance history (e.g., whether all returns are filed and accurate).
- Fairness to other creditors.
If the CRA believes your proposal gives creditors a better return than bankruptcy, it will generally vote in favor.
The agency’s insolvency department evaluates your repayment offer through a “proof of claim” process. This confirms the accuracy of the debt amount and your eligibility.
When CRA votes “yes,” it usually signals approval to other creditors as well, increasing the likelihood that the proposal passes.
Why would the CRA reject a consumer proposal?
While the CRA accepts most well-structured proposals, there are specific reasons they might reject or object to one, including:
- Unfiled tax returns: The CRA will not consider any proposal if prior years’ returns haven’t been filed.
- Low repayment offer: If the proposal doesn’t meet the CRA’s minimum recovery expectations compared to bankruptcy.
- Incomplete disclosure: Failing to declare all income, business earnings, or assets.
- Poor compliance history: Repeated late filings, prior bankruptcies, or tax evasion concerns.
If the CRA rejects the proposal, your LIT can often negotiate revised terms or file an amended proposal.
Or for more information on how the federal system manages objections and amendments, visit the OBS page on Canada.ca.
Did you know? Many proposals that are initially rejected are later accepted once tax filings are complete or payment terms are improved.
How is your tax debt treated once the CRA accepts?
Once the Canada Revenue Agency (CRA) accepts your consumer proposal, the agreement becomes legally binding under the Bankruptcy and Insolvency Act (BIA).
From this point, all collection actions, wage garnishments, bank freezes, and interest charges immediately stop.
Here’s what happens next:
- Interest and penalties are frozen: The CRA stops adding new interest or late fees to your balance.
- Collections end: The CRA stops all enforcement, including wage garnishments and liens.
- Consolidated payments begin: You make fixed monthly payments to your LIT, who distributes the funds to the CRA and any other relevant creditors.
Rising CRA debt weighing you down? Take a moment to speak with one of our Licensed Insolvency Trustees for expert advice on what to do next.
Call free on 800-268-8093 or leave your details with us and we’ll be in touch.
Example scenarios: How the CRA accepts and treats consumer proposals
To illustrate how CRA typically handles consumer proposals, here are three common real-world examples:
Scenario 1: Personal income tax debt
A salaried employee owes $40,000 in personal income tax arrears. The trustee offers a 30% repayment plan ($12,000) over 5 years.
Because the taxpayer has filed all returns and the proposal offers more than CRA would recover through bankruptcy, the CRA votes yes.
Scenario 2: Business owner with payroll remittances
A small business owner owes $100,000 in payroll deductions and personal tax debt. CRA initially objects, citing late filings.
After the LIT updates outstanding returns and revises the proposal to 35% repayment, the CRA approves.
In both cases, once the proposal is accepted, the CRA stops interest and collections, allowing debtors to focus on repayment without pressure.
Scenario 3: Self-employed contractor with unfiled returns
A contractor owes $55,000 in income tax and GST/HST. The trustee submits a proposal offering 25% repayment over five years.
When the CRA reviews the file, they find three unfiled GST/HST returns and missing income details from prior years.
Because the filings aren’t current and the repayment offer doesn’t reflect the contractor’s recent earnings, the CRA rejects the proposal.
The trustee then completes all outstanding returns, updates the income information, and revises the offer to show a stronger repayment plan before resubmitting for another vote.
What do you do if the CRA rejects a consumer proposal?
While CRA approves most compliant proposals, rejections do happen. Fortunately, they’re often negotiable. Here’s what can happen if the CRA objects:
- Your Licensed Insolvency Trustee can negotiate revised terms
If the CRA objects to your first offer, your LIT can review the file, compare it with likely bankruptcy outcomes, and prepare a stronger repayment plan.
This may involve adjusting the monthly amount, increasing the overall repayment percentage, or reshaping the proposal so it better reflects your income and assets.
- File any missing tax returns
The CRA will not consider a consumer proposal if your filings are incomplete. Your trustee will help identify any outstanding years and make sure everything is submitted before negotiations continue.
Once the returns are filed, the CRA has the full picture it needs to assess your proposal fairly.
- Submit an amended proposal
If changes to your proposal are needed, your LIT can prepare an amended version of the offer and send it back to creditors for another vote.
This revised proposal may include different terms, updated income details, or new repayment figures, giving the CRA a clearer and more acceptable path for recovery.
If the CRA continues to reject the proposal after adjustments, your LIT may advise on alternatives such as bankruptcy or refiling a new consumer proposal with improved terms.
The CRA rarely rejects a proposal out of hand; their main concern is your compliance, ability to repay, and fair treatment.
Common misconceptions about the CRA and consumer proposals
There’s a lot of misinformation about how CRA handles debt once a proposal is filed. Let’s clarify a few myths:
- Myth: The CRA never accepts consumer proposals
The CRA is one of the largest creditors in Canada and accepts thousands of consumer proposals every year. - Myth: You can file a consumer proposal even with unfiled tax returns.
The CRA requires all tax filings to be current before voting on your proposal. - Myth: The CRA continues to charge interest after approval.
Once your consumer proposal is accepted by the CRA, all interest and penalties are permanently frozen. - Myth: You lose future tax refunds after applying for a consumer proposal with the CRA
Refunds from pre-proposal tax years may be applied to your debt, but future refunds belong to you.
Take the next step with a Licensed Insolvency Trustee
If you’re ready to bring your tax balance under control, the LITs at Harris & Partners are here to help.
We’ll review your position, confirm which CRA debts qualify, and set up a repayment offer that meets CRA standards.
Book your free consultation now for a private, no-strings conversation focused on what you can realistically manage.
Get in touch today at 800-268-8093 or via our online contact form to start your journey towards financial freedom.
For more information on how trustees work within the federal system, you can also check out the CAIRP (Canadian Association of Insolvency and Restructuring Professionals) site.
