What will happen to you if you can’t repay CERB benefits?
Many want to know the answer to this problem and needless to say, many are worried about it.
Bottom line is that if you can’t repay CERB benefits, the debt will be treated like any other unsecured debt (like credit card and charge card debt) and will be dischargeable in a consumer proposal or bankruptcy.
The federal government provided several emergency relief measures in 2020 in response to the Covid-19 pandemic.
The Canada Emergency Response Benefit (CERB) provided financial support to employed and self-employed Canadians who were directly affected by COVID-19.
If you were eligible, you could have received $2,000 for a 4-week period (the same as $500 a week).
The CERB program paid out close to $82 billion to approximately 9 million Canadians to compensate for job losses suffered due to mandatory closures of ‘non-essential’ businesses.
To ensure that Canadians received timely benefit payments, eligibility verification by the government was not prioritized.
Government now taking action to collect:
In late 2020, the Canada Revenue Agency (CRA) sent out over 440,000 letters to CERB recipients to verify eligibility.
And recently (January 2022) the CRA sent another round of letters to thousands more recipients.
For some, the letters have instilled fear and uncertainty about the actions CRA may take if they deny CERB eligibility and demand repayment of some or all of the received benefits.
The CRA has stated that the letters are not repayment demands but are requests for income verification. The CRA may demand repayment if income verification is not forthcoming or if there may be clear evidence that the recipient did not meet the income eligibility threshold (i.e., earned at least $5000 in the 12 months preceding the application).
Many people have contacted our offices recently to ask what they can do if they can’t repay CERB .
Just today (March 25, 2022) The Office of the Superintendent of Bankruptcy (OSB) issued a Notice to LITs (licensed insolvency trustees) titled Guidance regarding overpayment of the Canada Emergency Response Benefit.
The Notice indicated that the Government of Canada is beginning to recover CERB benefits where the benefits were paid in error or due to an overpayment.
The Notice also clarifies that this type of debt is releasable (‘goes away’) in a consumer proposal or bankruptcy.
In other words, if you receive an assessment or demand from CRA to repay CERB benefits, this debt is dischargeable in a proposal or bankruptcy. This has brought a great deal of relief to those who can’t repay CERB.
That said, in situations where the CRA alleges that the debt was obtained through misrepresentation or fraud, it is possible that they could seek a court order stating that the debt should survive (not go away) after filing a consumer proposal or bankruptcy. It is not known at this time how aggressively the CRA will pursue this type of order.
In the event that the CRA sends you a letter demanding payment and you find that you can’t repay CERB, it is best to discuss options with a licensed insolvency trustee.
CERB, like tax debt and other unsecured debt, is dischargeable in both proposals and bankruptcies.