CERB repayment: what if I can’t afford it?

Posted on 15 May 2023

Written by Ashvin Sharma

Are you anxious about how you will go about paying back government benefits? This is the problem of many Canadians, who, in the height of lockdown during the pandemic, were unable to work. You and many others may have received support via the Canada Emergency Response Benefit (CERB), and now owe a government debt that needs to be repaid. The CERB paid out $81.6 billion in benefits to nearly 9 million people. Many Canadians received these benefits without a full understanding of their eligibility and whether or not they met them. This was partly due to the speed with which the program was rolled out. Now, many Canadians have found themselves in this situation, whereby the Canada Revenue Agency (CRA) has asked for these benefits to be paid back. If you were one of these recipients, you may be wondering ‘what if I can’t afford to make my CERB repayment?’ It can be a stressful scenario to say the least, knowing that you owe a CERB repayment on top of a rising cost of living and increasing bills. In this article, we explain all you need to know about making your CERB repayment. At Spergel, we have been helping Canadians gain debt relief for over thirty years and we will share with you the available options if you cannot afford to make your CERB repayment.

What is Canada Emergency Response Benefit (CERB) and CERB repayment?

The Canada Emergency Response Benefit (CERB) was a program designed to offer financial support to Canadians who were affected by COVID-19. If you met the eligibility criteria, you could receive $2,000 for each 4-week period you were affected. The financial options were also altered slightly, meaning that many could also receive benefits via Employment Insurance or the Canada Recovery Benefit. You were eligible if you were a Canadian worker and met the following criteria:

  • At least 15 years old, and living in Canada
  • Stopped working because of COVID-related reasons, or were eligible for Employment Insurance or sickness benefits – or, if you exhausted any of these benefits between December 29, 2019, and October 3, 2020
  • Were employed or self-employed with an income of at least $5,000 in 2019 or in the year prior to the date of application
  • Did not quit your job voluntarily

When submitting a claim, you could not have earned over $1,000 for any more than two weeks in the four week period prior. There were a number of mistakes in the applications meaning some Canadians received multiple payments by accident.

Why are Canadians being forced to make a CERB repayment?

Because of the urgency of the COVID pandemic, the government reacted quickly to get money to Canadians who needed it. This led to the CERB program being rolled out before it was fully complete. For this reason, some individuals received CERB payments by mistake. There are three key situations where CERB payments were made to those not entitled to them:

  • Not having the income to meet the eligibility criteria
  • Receiving CERB overpayment from the CRA and Service Canada
  • Earning more than anticipated when making an application for CERB

For this reason, the Canada Revenue Agency (CRA ) is collecting CERB repayment from those who should not have received it on behalf of Service Canada. They sent out collection letters to those who received the benefit payments while ineligible. They also issued an accompanying statement to explain that the benefit was sent to participants without any oversight and that:

  • If you received CERB that you were not eligible for, you would be sent a notice of redetermination
  • If you cannot make your CERB repayment in full, you would not receive any interest or penalties on your debts
  • The CRA may keep any of your owed future payments, tax refunds, or GST credits until your CERB repayments are made – this is even if you have a payment arrangement in place with the CRA
  • If you are receiving EI benefits, your CERB repayment will be taken by Service Canada at source at 50% of your benefit

At the same time, the CRA then began to run through the payments to make sure that only those meeting the eligibility criteria were receiving CERB payments. They began to verify participants’ information either during the filing process, or afterwards.

What if you cannot afford to make your CERB repayment?

Perhaps you have discovered that you must make a CERB repayment but cannot afford to pay back the full amount right away. Or, perhaps you cannot afford the minimum monthly payment on your account? In these circumstances, you should contact the CRA. They will help you to arrange a repayment plan in a way that is affordable for you. You may also want to speak to them if you feel your CERB repayment is incorrect, or if you want to try to reduce your automatic recovery via EI benefits. If you do not call the CRA to try and resolve your CERB repayment, they may pursue legal action against you on the debt owed. If you need to make a CERB repayment, you will have received a collection letter, especially if any of the following apply to your circumstances:

  • You returned to work earlier than expected, or if you received retroactive pay from your employer
  • You applied for the CERB but realized afterwards that you were ineligible
  • You received a CERB payment from both Service Canada and the CRA for the same period of time

Following public reaction, the government announced last year that self-employed Canadians who applied for CERB, and would have qualified based on their gross income, no longer need to make their CERB repayment as long as they met all other eligibility criteria. This followed weeks of criticism of the CRA for not providing clear guidance.

What are the consequences of not making your CERB repayment?

As you can imagine, requesting CERB repayment has left many Canadians in a difficult situation. This is reinforced by the fact that the money is owed to the CRA, which has far greater powers than any other creditor. The CRA can quickly act, without much notice to you, although they have taken softer steps when it comes to collection CERB repayment. Consequences that the CRA can take if you fail to make your CERB repayments include:

  • Pursuing a wage garnishment against you
  • Freezing – or seizing – your bank account
  • Registering a lien against your assets
  • Seizing your home or assets for resale
  • Allocating any tax benefits including future tax refunds and benefits or credits towards your debt, including CCB and WITB

When the CRA acts on any of these steps, typically they will not stop. No matter how bad you may feel your situation to be, there is always a solution. Your first port of call should be a Licensed Insolvency Trustee, who can recommend a solution to make the CRA stop. If you are struggling with making your CERB repayment or any kind of debt owed to the CRA including tax debt, you should act quickly and book a free consultation with a Licensed Insolvency Trustee. There are solutions for CERB repayment forgiveness as well as all other types of debt, no matter if it is owed to the government or another creditor. You can also reach out to the CRA to work with them on a repayment plan that is affordable for you. The key here is communication, and ensuring they are aware of your situation. If they do not hear anything and you are not making your CERB repayments, this could signal to them that they need to take further action. If you are struggling to make your CERB payments, you may also want to look into a form of debt relief, which we will discuss further in this article.

What solutions are available for forgiving or consolidating CERB if I cannot afford to make my CERB repayment?

The CRA has made its intentions clear that it wants to verify CERB benefits and reclaim as much money as possible where money should not have been paid out. It does also accept that some people made honest mistakes in their applications. Paying back CERB will understandably be difficult for some Canadians who were not expecting to repay the benefit. Recently, the Office of the Superintendent of Bankruptcy confirmed that CERB is a releasable debt in insolvency. This means that you can write off CERB repayment along with other debts via a consumer proposal or bankruptcy when filed by a Licensed Insolvency Trustee. Here are your options for resolving your CERB repayment:

  • Paying in full if you can afford to
  • Speaking to a CRA agent to arrange a payment plan if you need more time to repay
  • Taking out a debt consolidation loan to condense all your debts into one for simplified payments and often a lower interest rate
  • Filing a consumer proposal (a popular bankruptcy alternative) to keep your assets and reduce your debt by up to 80%
  • Declaring bankruptcy to clear your CERB debt if your payments were made erroneously or as an overpayment. In most cases, you can be discharged from bankruptcy in as little as nine months

Beyond making your CERB repayment in full, filing a consumer proposal or a bankruptcy via a Licensed Insolvency Trustee are the only legal methods of clearing or reducing your government debts.

At Spergel, we understand how challenging handling overwhelming debt can be. If you are wondering ‘what if I cannot afford to make my CERB repayment?’, you should book a free consultation with a reputable Licensed Insolvency Trustee. At Spergel, we have been helping Canadians get out of debt for over thirty years, and we can help you too. We will get you on the pathway to financial freedom as quickly as feasibly possible.

Ashvin Sharma

Ashvin Sharma

Ashvin Sharma is a Chartered Insolvency and Restructuring Professional and LIT (Licensed Insolvency Trustee) overseeing all of Spergel's offices in the Greater Vancouver Area and British Columbia. He is also our resident expert on homeownership debt and health debt. In his spare time, Ashvin loves to play sports, spend time with family and friends, and serves as a volunteer coordinator for "Free-Them", a Canadian organization committed to raising awareness about human trafficking.

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