What if I can’t pay back CERB? A guide to your options

Posted on 8 August 2022

Written by Ashvin Sharma

In the height of lockdown during the pandemic, many Canadians were unable to work. The government response was to issue the Canada Emergency Response Benefit (CERB) to help those out of work due to COVID. Now defunct, the program was rolled out quickly following some validation checks to provide payment cheques to those who were left without a job and unable to work. 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. This meant that some Canadians who were not eligible received the benefits. Recently, these recipients will have received letters from the Canada Revenue Agency (CRA) asking for the benefits to be paid back. If you were one of these recipients, you may be wondering ‘what if I can’t pay back CERB?’ In this article, we explain all you need to know about repaying CERB, and what to do if you cannot afford to make the repayments.

What is CERB?

The Canada Emergency Response Benefit (CERB) was a program designed to offer financial support to Canadians who were affected by COVID. If you met the eligibility criteria, you could receive $2,000 for each 4-week period you were affected. 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.

Why are Canadians being forced to pay back CERB?

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 CRA sent out collection letters to those who received the benefit payments while ineligible. There was also an accompanying statement to explain that the benefit was sent to participants without any oversight. This was to change, with the CRA now running through the payments to make sure that only those meeting the eligibility criteria were receiving CERB payments. This meant that they wanted to verify participants’ information either during the filing process, or afterwards.

Sending back your CERB payment

CERB payment amounts are taxable. You must report the CERB amounts that you receive as income when you file your personal income tax return. How much tax you must pay will depend on how much income you earned. Perhaps you received the CERB payment while ineligible. In this case, you will have received a collection letter for your CERB payments. You will need to send your CERB payment back if you did any of the following:

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

Following public reaction, the government announced earlier this year that self-employed Canadians who applied for CERB, and would have qualified based on their gross income, no longer need to repay the CERB as long as they met all other eligibility criteria. This follows weeks of criticism of the CRA for not providing clear guidance. If you still need to repay CERB due to other ineligibilities, you would have received interest relief until April 2022. Learn more about returning or repaying the CERB to the CRA or Service Canada.

What are the consequences of not repaying your CERB?

As you can imagine, asking for the repayment of CERB has left many Canadians in a difficult situation. This is reinforced by the fact that the money is owed to the CRA, who have greater powers than other lenders. Consequences that the CRA can take if you fail to make your CERB repayments include:

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

In order to avoid these consequences, you need to act quickly. You can 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. We will discuss this in further detail below.

What if I can’t pay back CERB?

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. Thankfully, there is always a solution for clearing the debt. Here are your options:

  • 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
  • Arranging a debt management plan to lower your monthly debt payments
  • Filing a consumer proposal 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

At Spergel, we understand how challenging handling overwhelming debt can be. If you are wondering ‘what if I can’t pay back CERB?’, 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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