How long does a bankruptcy last?

The length of the bankruptcy depends on a few factors – whether you have ‘surplus income’ (see below) and whether you have been bankrupt before. If you have no surplus income and have never been bankrupt before, you will be eligible for an automatic discharge after nine months.

How long does the Consumer Proposal last?

A Consumer Proposal must be completed within 5 years. Usually the payments are monthly (over 60 months), but a Consumer Proposal can also include a lump sum payment, or a combination of the two. If your finances allow, you can pay it off sooner than the agreed-upon payment schedule lays out.

What is a bankruptcy?

A bankruptcy is a legal process to discharge your debts. It is a declaration that your debts are too high for you to repay – and far better than the old concept of a ‘debtor’s prison’! It allows for a fresh start, while giving your creditors some return on what’s owed only if you have a level of income that allows for payments to be made to them, or unprotected assets that can be liquidated (however, most common assets are protected during this process – see below for more information on protected personal assets).

What is a Consumer Proposal?

A Consumer Proposal is an offer to your creditors to pay back a percentage of what you owe them, based on your ability to pay. It is governed by the Bankruptcy and Insolvency Act, administered by a Licensed Insolvency Trustee. Unlike other negotiated debt settlement plans, it is legally binding on all creditors and usually involves paying back less than the total amount of your debt.

What is a Licensed Insolvency Trustee (LIT)?

Licensed Insolvency Trustees (LITs) are federally regulated professionals who provide advice and services to individuals and businesses to reorganize and resolve financial difficulties with expertise and compassion. LITs help individuals or businesses make informed choices to deal with their financial difficulties. They are the only professionals able to administer bankruptcies or proposals.

CERB Repayment Forgiveness: What If You Can’t Pay?

Getting a letter saying you have to repay CERB can be stressful, especially if that money is long gone and you don’t have thousands of dollars available to pay CRA.

If you’ve received a CERB repayment notice, don’t ignore it. What you do next depends on why you’ve been asked to repay CERB, whether you agree that you owe the money, and what you can actually afford to pay.

Why Do I Have to Repay CERB?

CERB was introduced during the COVID-19 pandemic to provide financial support to Canadian workers whose income had been affected. Eligible applicants could receive $2,000 for each applicable four-week period.

Years later, some people are being asked to repay the CERB they received. There are a few reasons this can happen:

You applied for CERB and were later found not to meet the eligibility requirements
You earned more income than expected while receiving CERB
You returned to work earlier than expected or later received retroactive pay
You received CERB through both CRA and EI/Service Canada for the same period

If CRA or Service Canada determines that you received benefits you weren’t entitled to, you may receive a notice telling you how much you need to repay.

What Did You Need in the First Place to Qualify for CERB?

CERB eligibility was based partly on what you earned before applying and how your income was affected during COVID-19.

Generally, you needed to have earned at least $5,000 in 2019 or during the 12 months before applying. There were also limits on how much employment or self-employment income you could earn while collecting CERB.

The rules created some confusion, particularly for self-employed people. If your repayment notice says you weren’t eligible, look at the reason given before deciding what to do next.

What If I Think My CERB Repayment Notice Is Wrong?

If you believe you qualified for CERB and shouldn’t have to repay it, you can ask CRA or Service Canada to review your case.

These reviews can take time. While you’re waiting, don’t simply put the repayment notice aside. Contact the agency handling the debt and find out what they need from you while the review is underway.

What Should I Do If I Can’t Afford to Repay CERB?

You may owe the CERB repayment and still have no realistic way to pay the entire balance at once. If that’s where you are, start by contacting CRA.

CRA does not add interest or penalties to COVID-19 benefit overpayment debts. If you can’t pay the balance in full, you may be able to make payments over time.

You may also have searched for CERB repayment forgiveness hoping there is a way to have the balance cancelled because you can’t afford it. There isn’t automatic forgiveness based simply on your ability to pay. There are, however, different ways of dealing with the debt depending on why you owe it and what the rest of your finances look like.

Contact CRA About a CERB Repayment Plan

If you can’t repay CERB in one payment, talk to CRA about a repayment arrangement based on what you can afford.

You should also contact CRA if you disagree with the amount owing or believe the CERB claim involved fraudulent activity. If money is being automatically recovered from your EI benefits and you need to discuss the amount being taken, you can contact them about that as well.

It is recommended that you’re careful when contacting CRA as there’re still cases of fraudulent communications through text messages, emails and phone calls.

Will CRA Take My Tax Refund for CERB Repayment?

They can. If you have CERB debt owing, CRA may keep all or part of future payments or credits that would otherwise come to you, including your tax refund or GST credits, and apply the money to your balance.

Having a payment arrangement doesn’t necessarily prevent this. CRA can still apply these amounts to your CERB debt while you’re making payments. If you’re receiving EI benefits, CERB debt can also be recovered automatically by Service Canada at 50% of your EI benefit rate.

What Happens If I Don’t Repay CERB?

Ignoring a CERB repayment won’t make the balance disappear. If you don’t pay or make arrangements with CRA, collection action may eventually be taken.

Depending on your circumstances, that could include:

Garnishing your wages
Taking money from your bank account
Placing a lien on or seizing assets
Taking collection action involving your home
Applying government benefits or credits against what you owe

Not filing your tax returns isn’t a good workaround either. If you have unfiled returns, CRA may take other collection steps or issue an arbitrary assessment based on an estimate of your income.

If you already know you can’t afford to repay CERB, dealing with it sooner gives you a chance to understand your options before CRA takes further collection action.

Can CERB Debt Be Included in a Consumer Proposal or Bankruptcy?

CERB repayment can become especially difficult when it isn’t your only debt. You might also have credit cards, tax debt, loans or other payments that were already stretching your budget.

CERB overpayments can generally be included when dealing with debt through a formal insolvency process. This means the amount you owe for CERB may be dealt with as part of a consumer proposal or personal bankruptcy, rather than having to manage the CERB balance separately.

Whether either option makes sense is a separate question. A Licensed Insolvency Trustee will look at your CERB debt together with your other debts, income, expenses and assets before explaining what your options would involve.

Consumer Proposal

A consumer proposal may allow you to include your CERB repayment with your other unsecured debts and offer your creditors an agreed amount to settle those debts.

Instead of trying to manage CRA and your other creditors separately, payments are made according to the terms of the proposal. How much you would need to offer depends on your own financial situation.

Personal Bankruptcy

CERB overpayments may also be included in a personal bankruptcy.

Bankruptcy can release you from eligible debts, including CERB overpayments. What bankruptcy would involve for you depends on things like your income and assets, so this is something to review with a Licensed Insolvency Trustee before making a decision.

Get Help With CERB Repayment in BC

If you’ve been told to repay your CERB and you don’t know where the money is going to come from, you can contact us.

At Campbell Saunders Ltd., our Licensed Insolvency Trustees can look at your CERB repayment along with your other debts and help you understand what you can do next.

Book a free consultation with a Licensed Insolvency Trustee.

Frequently Asked Questions About CERB Repayment

Do I have to repay CERB if I can’t afford it?

If CRA or Service Canada has determined that you owe a CERB overpayment, not having the money to pay it doesn’t automatically eliminate the debt. You may be able to arrange payments over time. If you can’t reasonably afford a repayment plan either, speak with a Licensed Insolvency Trustee about your situation.

Is there CERB repayment forgiveness in Canada?

There is no automatic CERB repayment forgiveness simply because you can’t afford the balance. If you believe you were eligible for CERB, you can ask for the decision to be reviewed. If you do owe the money but can’t afford it, CERB overpayments may also be dealt with through a consumer proposal or bankruptcy.

Can I make payments instead of repaying CERB all at once?

Yes. If you can’t repay CERB in full, you can contact CRA to discuss a repayment arrangement. Interest and penalties are not added to COVID-19 benefit overpayment debts.

Will CRA take my tax refund if I owe CERB?

They can. CRA may apply some or all of your tax refund or GST credits to your CERB debt. This can happen even when you have a repayment arrangement in place.

Can CERB repayment be included in a consumer proposal?

CERB overpayments can be releasable debts in an insolvency and may be included in a consumer proposal. A Licensed Insolvency Trustee can determine how the debt would be treated based on your circumstances.

Can CERB debt be included in bankruptcy?

CERB overpayments can be releasable debts in bankruptcy. Before filing, a Licensed Insolvency Trustee can explain how bankruptcy would affect your CERB balance and your other debts.

What should I do if I think my CERB repayment notice is wrong?

Contact CRA or Service Canada and ask for your eligibility to be reviewed. Keep any documents related to your CERB application and repayment notice, and find out what is expected from you while the review is underway.