Can CERB Repayment Be Included in Bankruptcy?
Thousands of Canadians have recently received collection letters from the Canada Revenue Agency asking that they repay the Canada Emergency Response Benefit (CERB). This is an unexpected expense that can stress your life and finances.
If you or someone you know has gotten one of these letters, you might be wondering why, and how you can repay it. As well, you might be curious to see how to bring down this debt (and any other debts) with a Consumer Proposal or a Bankruptcy. This brings us to the question that many people are wondering: Can CERB repayment be included in a Bankruptcy filing?
Why Your CERB Might Have to be Repaid
First, let’s touch on a few of the reasons why you might be asked to repay CERB.
To start off, you may have miscalculated your income. The eligibility criteria for income was misunderstood by some applicants, leading to people getting CERB even when they didn’t actually qualify.
This income miscalculation could have been caused by applying with your gross income instead of your net income. Gross income is the amount of income you earn before taxes, benefits, and other payroll deductions, while net income is the amount remaining after these deductions.
As well, some types of income cannot be included in your calculation, including the following:
- Canada Child Benefit (CCB),
- Social Assistance/disability,
- Pension income,
- Student loans and bursaries,
- Spousal/child support,
- Employment Insurance (EI), and
- Investment income.
Having these incomes should not have any impact on your eligibility, as long as you meet all the other criteria and that your job loss was related to COVID-19.
You might also be asked to repay CERB if you ended up receiving more income than you thought during that period of time. For example, if you received retroactive pay (i.e. if you received pay for a previous period where you weren’t compensated), you will have to repay the benefits received during that specific time period.
As well, if you went back to work sooner than expected, you will also have to repay CERB for the period that you were both employed and receiving CERB.
During the pandemic, Canadians were able to apply to CERB through two institutions: the Canada Revenue Agency and Service Canada. Although people were only supposed to receive money through one of the two agencies, some people did apply to both, and ended up getting the benefit from both. Anyone who received payments from both institutions are being asked to repay one of the benefits to the CRA.
But, why were these applications still accepted to receive CERB? At the time when CERB was being distributed, the Canada Revenue Agency and Service Canada were not thoroughly investigating the applications. They were focused on distributing the benefits in a financially uncertain time. Now, the CRA is going back and checking everyone’s eligibility, and asking for repayments.
How to Repay CERB
If you have received a collection letter, here are a couple of ways you can go about repaying CERB.
First, if it’s possible, you can pay back the balance in full to either the Canada Revenue Agency or to Service Canada, depending on where you originally applied.
Though for many Canadians, this is a very unexpected expense that they won’t be able to pay off in one payment. One good option is to speak directly to someone by phone at the CRA. They are willing to work with you to figure out a payment plan so you can pay off your debt over time. The CRA is accepting more flexible payment options depending on what you can afford.
Many students are also being asked to repay CERB. If you are a student, there is a possibility that you may be able to receive a credit towards this debt. You can check your eligibility for this credit on the Government of Canada website. Then you can submit a form and supporting documents to the CRA by mail, fax, or online.
If you cannot see yourself being able to repay CERB, and are struggling with other debt, you can consult a Licensed Insolvency Trustee (LIT). They can give you great financial advice and help you explore all your options. If it comes to it, they can help you file a Bankruptcy or Consumer Proposal to try and minimize your debt payments.
The best thing to do is to try and pay off CERB as soon as you can, as long as you can afford it. Since CERB is new and there were some misunderstandings about who could get it, the CRA is being somewhat lenient right now with their collection action, but there still can be consequences and penalties.
CERB Payments and Bankruptcy
When it comes to legal options like a Bankruptcy or a Consumer Proposal, many people are wondering if CERB debt will be released at the end of one of these processes.
CERB debt is considered a dischargeable debt under most circumstances, even if the payments were received by mistake. This means that once all the duties have been performed and you have been discharged, you can be free from CERB debt.
Section 178 of the Bankruptcy and Insolvency Act shows which debts will not be released at the end of a successful Bankruptcy, and CERB debt is not listed. The only exception is if the CERB payments were obtained in a fraudulent manner or via misrepresentation. At this point, CERB debt discharge is still being examined on a case-by-case basis, but in most cases, it will be released.
If you are struggling to repay CERB debt—and maybe other debts too – consult with a professional like a LIT. They can help you navigate your personal finances and lead you to the best solution possible for your situation. For example, a Consumer Proposal is the most popular way to consolidate your unsecured debt in Canada.
CERB Repayment – Contact Us for Debt Help
If you are losing sleep over your finances it is time to take action.
At Derek L. Chase & Associates, we offer a free initial assessment where we will analyze your finances and provide you with information on what options are available to you. This appointment is confidential and non judgemental.
Filing a Consumer Proposal or a Bankruptcy in Canada is designed to provide the honest, unfortunate debtor a fresh financial start. Contact us to set up your free appointment today.