As Licensed Insolvency Trustees we regularly hear from BC residents looking for advice, guidance and solutions on how they can manage a variety of consumer and business-related debts, including debt for money owing to both provincial and federal governments.
If you have received correspondence indicating you may need to repay some, or all the emergency benefits received, or you are worried you may need to repay these benefits, read on to learn about what you can do if you are unable to afford repayment.
About Canada Emergency Response Benefit (“CERB”) Repayments
There are a few scenarios that could result in you returning or being required to repay the Canada Emergency Response Benefit you previously received:
- You resumed your employment earlier than anticipated
- You received retroactive pay from your employer
- You received CERB via both Employment Insurance (Service Canada) and Canada Revenue Agency (CRA) for the same period
- You were not eligible to qualify
From discussions with our clients thus far, confusion over the minimum amount of income needed to qualify for CERB is emerging as a prevalent cause for potential repayment. The main requirement of $5,000 of income earned either in 2019 or in the 12-month period prior to receiving CERB payments appears to not have been widely understood.
We’ve heard from self-employed individuals who mistakenly believed that their “gross income” (i.e. before deducting business expenses) was the key metric to qualify. Subsequently, some individuals have found that their “net income” (i.e. after deducting business expenses) did not exceed $5,000 which made them ineligible to receive CERB payments.
In addition, it’s important to understand that there are certain types of income that are excluded in the qualifications criteria for CERB such as investment income, pension income, Canada Child Benefit, and others.
The Canadian Government took a deliberate approach of prioritizing speed of issuing payments above performing checks to ensure eligibility. The result is that an unknown amount of CERB was issued to individuals who may not have met the qualifying criteria and CRA is now examining each case to see if repayment is warranted, several months after the final cheques were issued to Canadians.
What Should I Do if I Have to Repay CERB?
Finding out that you may have to repay CERB, or any other unexpected debt, can feel overwhelming and incredibly stressful, particularly as most people do not have the ability to simply repay an unanticipated balance outright. CERB was intended to provide a short-term replacement of income during the COVID-19 pandemic to cover immediate living expenses – it’s no surprise that just about everyone we speak to spent these funds in the month they were received to cover the necessities of everyday living.
Although Canada Revenue Agency has begun sending letters that include a request to repay ineligible CERB payments, they have stated that they:
- Will have flexible payment arrangements, determined on a case-by-case basis.
- Will not charge penalties or interest on repayments, “where errors were made in good faith” – unlike with other types of government debts.
Learn About Other Types of Government Debts, and Having Them Forgiven
If you have discovered that you must repay CERB amounts received but are unable to repay the full amount you owe immediately, you may wish to contact CRA to discuss repayment arrangements that are manageable for your specific situation. You can reach a CRA representative about a repayment plan at: 1-800-959-8281 (9AM-5PM – local time).
If you are concerned about the impact of having received CERB on your taxable income for 2020, it is important to know that taxable amounts will be adjusted if repayments are made, regardless of the reason for the repayment.
What if I Can’t Repay my CERB?
If you find yourself in a position where you are unable to repay CERB there are a few key points to be aware of historically when it comes to CRA balances owing:
- Although CERB repayments are still very new, we anticipate that it will be treated the same as other government debt that are not considered debts that will expire under BC’s Limitation Act (the provincial statute that limits the time in which a creditor may take legal action against you).
- Attempting to avoid outstanding CRA balances by non-filing of income tax returns is not an effective long-term strategy.
- If you have unfiled income tax returns CRA may resort to actions such as placing holds on your bank account or issuing “arbitrary assessments” of your tax returns, creating tax debt based on estimates of your income.
- Besides repaying the balance in full, accessing legal debt resources such as a Consumer Proposal or bankruptcy working with a Licensed Insolvency Trustee is the only method CRA will accept to negotiate or forgive government debts.
- It is the professional opinion of many Licensed Insolvency Trustees across Canada that “honest but unfortunate” CERB repayments will be classed as dischargeable (forgivable) debt, as is the case with most types of government debts.
How Does the Government Collect on Debt?
CRA is a forceful creditor who can quickly take steps to collect on unpaid debts that are more difficult for other types of creditors access. Common remedies that CRA may apply when collecting on government debts may include:
- Wage garnishment
- Garnishments can be applied to many types of earnings, not just employment income
- Seizure of future income tax refunds
- Seizures or holds on bank accounts
- Registering a lien on your home or other property
Learn More About Wage Garnishment, and How to Stop it
If you are feeling the stress of debt or pressured to find a solution, understand that you are not alone. A Licensed Insolvency Trustee can help you assess your overall situation and options that are available to you that can help you effectively eliminate virtually all types of debts and move forward with your life. When you connect with a Sands & Associates representative we will take the time to understand your concerns and goals and offer non-judgmental, caring support throughout the process.
In Canada Licensed Insolvency Trustees are the only debt help professionals fully empowered, qualified, and endorsed by the federal government to assist individuals with legal debt help services.
Solutions to Manage Government Debts
Many people are surprised to learn that they have rights and remedies available to them that can allow for legally reducing or fully forgiving even government debts. In addition to options that can deal with consumer debts such as credit cards, lines of credit or payday loans, debt solutions (such as those noted below) offered by Licensed Insolvency Trustees can also cover government debts, including:
- Repayment of government benefits
- Provincial, federal (and private) student loans
- Income tax debt
- Business GST and payroll debt
- ICBC debt
- Outstanding MSP debt
Consolidate with a Consumer Proposal: Consumer Proposals are a unique but little-known debt management tool for Canadians that allow you to consolidate your debt into one reduced balance with a manageable monthly payment, without borrowing, paying interest, or even added administration fees. Making a Consumer Proposal can be a powerful solution that drastically cuts your debt, with the unpaid portion being written-off by your creditors.
Declare Bankruptcy: In BC the personal bankruptcy process is very private, straight-forward and may last as little as 9 months. If you are unable to make progress towards repayment of your total debts, you may find advantages to declaring personal bankruptcy as a means of having your debts fully forgiven by your creditors.
Access Debt Help Services Online
Debt management and bankruptcy services provided by Licensed Insolvency Trustees are a designated essential service, and as BC’s largest firm of Licensed Insolvency Trustees focused exclusively on debt help for individuals and small businesses, Sands & Associates is committed to ensuring residents throughout the province can access reputable professional debt help conveniently and safely. Working with Sands & Associates, BC residents can access our full suite of services including but not limited to:
- Free, confidential debt consultations and a full assessment of all available debt options, conducted over the phone or video conferencing.
- Making a Consumer Proposal to consolidate debt without borrowing; filed, served to your creditors and completed online.
- Filing bankruptcy to gain protection from your creditors and have debts forgiven; with the full bankruptcy process being completed online.
Get started with your debt-free plan today – book your free confidential debt consultation with a qualified BC debt expert now.
This content is not intended to be specific legal advice; it is intended to be a simple guide in layman’s language to provide a basic overview only. E. Sands & Associates Inc accepts no responsibility for its use other than as intended. The law is an ever-changing body of statutes and decisions, and the reader is advised to seek legal counsel for specific matters relating to their situation.