Massive CRA Debt Settled with New Mortgage

Massive CRA Debt Settled with New Mortgage

Published: December 5, 2017 Last updated: January 6, 2021 at 6:40 am

Tax Reassessment Disallows Charitable Deductions, Creates $175,000 CRA Debt

HomeTrust Company helped this homeowner eliminate massive CRA debt and get his life back on track!

Kirton Johnson is a devoted husband and provider to his family of four. In recent years, he found himself in a horrible mess with CRA. He now owes $175,000 — which is a bitter pill to swallow for someone making less than $70,000 per year.

A while ago his tax returns for several years long passed were re-assessed by CRA and they ruled he was not entitled to those refunds, because they resulted from charity donations which were disallowed.

Canada Revenue sees Kirton as one of many victims taken advantage of by tax preparers whose services formed part of a charity tax refund scheme. The roughly $175,000 of tax debt that Kirton owes is made up of $63,000 principal and $112,000 of penalties and interest!

No form found

Naturally, Kirton felt overwhelmed by his circumstances, and sat down with Howard Landau of Dodick Landau, who specialize in personal debt solutions.

Howard filed a consumer proposal for Kirton, and then went back and forth with CRA for a few months as they tried to hammer out a fair resolution.

Howard called our office in early October and explained the situation. He felt if he could make a lump sum payment offer to CRA and the other creditors, that might entice them to settle the debt. (Kirton also had a couple of minor credit card balances, but the main creditor was clearly CRA)

Howard contacted us because Kirton is a homeowner in Brampton – he was hoping we could refinance his mortgage such that we could free up a large amount to make a decent settlement offer.

The challenge… or should I say challenges… plural

  1. Kirton was right smack dab in the middle of a consumer proposal — actually he had filed the proposal, but it had not yet been formally accepted.
  2. His income is not that high, so he could not qualify for a super large mortgage.
  3. There are not many lenders who would be willing to help out Kirton.

But as I always say, we deal with dozens of lenders, and we just need one — one “magical” lender — that is just right for the circumstances.

The sweet [but-not-so-simple] solution

HomeTrust Company came through with flying colours. Even though this was a complex application with lots of moving parts, they were willing to collaborate with myself, Kirton, and Dodick Landau with CRA until all parties were happy.

Knowing he could make a large lump sum settlement, Howard Landau went back to CRA and within a few weeks an agreement was reached.

HomeTrust offered Kirton a $416,000 first mortgage at a decent rate and a thirty year amortization period — considering his circumstances, this was excellent. It means he can wipe out the $175,000 CRA debt completely, and his overall monthly mortgage payment has increased by only $900 or so.

With the proceeds of the mortgage the consumer proposal will end almost as soon as it begun. This is called a lump-sum consumer proposal and is an excellent approach for homeowners with debt problems.

The process of rebuilding his credit history can commence immediately too — within three years of his proposal completion, its very existence will be gone from his credit report.

To me, this story’s message is as huge as the debt itself! Proving that even what appears to be the most insurmountable financial situation, can often be set straight with some heavy lifting by the professionals. It’s not your average joe that actually enjoys collaborating with CRA.

If you or someone you know has overwhelming debt problems, we will be happy to talk to them and explain all their options. It could be a real game changer!


Related Articles:

​Ross Taylor
One of Toronto/GTA's Most Trusted and Knowledgable Mortgage Agents

Ross Taylor is recognized by his peers as one of Canada's pre-eminent difficult mortgage specialists. His ASKROSS blog and column ​ in Canadian Mortgage Trends are focused on the intersection between mortgage financing and personal credit.

With unique dual certification as a licensed credit counselor and mortgage agent, Ross's insights are valued by mortgage professionals and homebuyers alike.

If you have questions about anything financial or mortgage-related, please contact [email protected]. Ross answers everyone personally.

​For more information, visit About Ross Taylor.