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Jun 22, 2017

Asset forfeiture: Why would the CRA freeze a bank account?

Although the Canada Revenue Agency may freeze an Ontario resident's bank account primarily to gain the delinquent tax filer's attention, three other reasons may motivate the agency to take this action. This may result from a filer's failure to respond to demands to pay, failure to file taxes or failure to cooperate with the agency. In some circumstances, asset forfeiture could result.

The most appropriate way to respond to the freezing of a bank account is to take immediate action. No response may lead to a wage garnishment or a lien placed on the individual's property. An initial first step may be to open a different bank account. The filer needs to determine the reason for the action and how the problem can be solved.

The bank account may eventually be released if missing tax returns are filed within a week. If the problem involves owed money, it may be possible to negotiate a payment plan. However, the CRA is not likely to allow an extended payment period that exceeds one year. If the person cannot manage payment of the total outstanding amount within that time, other steps may be necessary.

In some cases, the best solution may be to file for personal bankruptcy or a consumer proposal. That may result in a stay of proceedings that will halt further action by the CRA and release the bank account.

An Ontario consumer who faces asset forfeiture or other action by the CRA may find it helpful to consult with an experienced bankruptcy lawyer before taking any other steps. Such a professional can assess the person's circumstances and explore all the available options. Once these are explained, it will enable the consumer to make informed decisions about how to proceed. Skilled legal guidance and support may go a long way toward helping a debtor to regain financial stability.