What If I Can’t Pay Back CERB?

Many Canadians received the Canada Emergency Response Benefit (CERB) during the pandemic due to their inability to work. Now, many recipients are facing the problem of repaying this government debt.

Many CERB applications were rushed through to meet deadlines, resulting in some recipients receiving multiple CERB benefits even if they weren’t eligible through no fault of their own.

The Canada Revenue Agency (CRA) is now seeking repayment of these benefits, putting further strain on Canadians still reeling from the pandemic and struggling to make ends meet.

In this guide, we’ll show you how to repay CERB, what happens if you don’t make your CERB repayments and the alternative CERB repayment options if you can’t pay back CERB.

What is the Canada Emergency Response Benefit (CERB)?

The Canada Emergency Response Benefit (CERB) was a federal government program that provided financial support to Canadian workers impacted by COVID-19.

Workers who met the eligibility criteria received emergency benefits of $2,000 every four weeks they were affected.

The CERB eligibility criteria were as follows:

• A resident of Canada and at least 15 years old.
• Stopped working due to COVID-19, qualified for Employment Insurance or sickness benefits, or used those benefits between December 29, 2019, and October 3, 2020.
• Earned at least $5,000 in employment or self-employment income in 2019 (or the year before you applied).
• Didn’t voluntarily quit your job.

Applicants could not earn more than $1,000 from employment during the four weeks of their new claim.

$82 billion in CERB payments were made to 8.9 million people whose incomes were decimated by the pandemic.

Do you have to pay back CERB?

CERB has to be repaid if it was received in error or if you did not meet the eligibility requirements.

Some of the most common CERB repayment scenarios are:

• You didn’t meet the income criteria.
• You received a CERB payment from both Service Canada and the CRA.
• You returned to work early or earned more than expected.
• You didn’t file your taxes.

Given the unprecedented nature of the pandemic, CERB applications were processed quickly, which led to mistakes and overpayments through no fault of the applicant.

Some applications didn’t meet the eligibility criteria, while some earned more income than expected while receiving CERB. As a result, many Canadians mistakenly applied for CERB despite being ineligible.

Then there was confusion among the self-employed regarding what the CRA regarded as pre-tax income. This communication breakdown meant some people received CERB they were not entitled to.

Now the Canada Revenue Agency (CRA) is clawing back CERB overpayments and other mispaid COVID-19 benefits on behalf of Employment and Social Development Canada (ESDC).

If you make the CERB repayment in full or make the minimum monthly payment on time, you’ll avoid legal action.

If you cannot make the required payment now, no interest or penalties will be applied, but you must contact the CRA to arrange a reduced regular payment.

Future tax refunds and GST/HST credits can be redirected to the CRA to repay the money owed.

If you receive EI benefits, Service Canada will recover CERB repayments at 50% of your EI benefit rate, but it’s possible to contact the CRA to lower this rate.

Do you have to pay back CERB if you qualified?

Not everyone has to pay back CERB. Canadians who qualified for CERB and received payments are not required to pay them back.

However, you must pay back the money if you received CERB payments in error or did not meet the CERB eligibility requirements.

Who doesn’t have to pay back CERB?

Self-employed Canadians that received CERB but mistakenly used their gross income rather than their net income can keep CERB payments if they meet some conditions.

This decision was made because the rules were not made clear to applicants by the CRA.

How to pay back CERB

You can pay back CERB through online banking.

• Choose Employment and Social Development Canada as the payee.
• Enter your Social Insurance Number (SIN).
• If your financial institution requires 11 characters, add the letters “YY” or the number “00” at the end of your entry.

Visit the CRA’s Repay COVID-19 benefits page for more payment information.

How to dispute CERB repayment

If you feel a CERB overpayment letter is incorrect or want to appeal or fight CERB repayment, contact the Canada Revenue Agency (CRA) and explain your situation. Provide any necessary documentation to support your claim.

What If I can’t pay back CERB?

If you can’t pay back CERB straight away or cannot make the minimum monthly payment, contact the Canada Revenue Agency (CRA) to discuss your CERB repayment options.

The CRA will work with you to settle your outstanding CERB repayments.

You can set up an affordable payment arrangement to repay the debt in installments within an agreed timeframe.

If CERB repayments are being deducted from your EI benefits, you can ask the CRA to reduce the repayment rate.

What happens if you don’t pay back CERB?

Although the CRA has a range of powers they can use to make you pay, they are currently taking a gentler approach in collecting CERB repayments compared to tax debts.

However, if you do not communicate with the CRA or make timely payments, they can garnish wages, take money from your bank, withhold tax credits, divert tax refunds, seize and sell your assets or place a lien on your property.

The CRA must make three verbal attempts to warn you of legal action and send a written warning before proceeding. The CRA typically does not withdraw legal actions once they’ve started.

If you cannot make your CERB repayments, book a free consultation with a Licensed Insolvency Trustee, who can advise you on resolving your debts.

CERB debt repayment options

If government debt repayment would send you into undue financial hardship and leave you unable to pay for necessities such as housing, food, and utilities, apply for help under the financial hardship provision.

If you have run up lots of debt but have a good credit score, you might benefit from a debt consolidation loan to combine all of your debts into a single payment at a lower interest rate.

There are also CERB repayment forgiveness options, which we will cover in the next section of this article.

Is there a CERB repayment forgiveness program?

The Canadian government is actively pursuing CERB repayments through the powers of the CRA, but debt forgiveness options are available if you can’t afford to repay your debts.

Bankruptcy and a consumer proposal are two formal debt solutions that offer CERB repayment forgiveness. Most unsecured debts, including credit cards, loans and CRA debts, can be forgiven.

A consumer proposal lets you settle your unsecured debts, including CERB benefit repayments, for an amount you can afford. You can reduce your debt and consolidate the rest into a monthly payment. You can protect your assets too.

Declaring bankruptcy also eliminates CERB repayments and can be a fast way to resolve debts you have no hope of paying back.

You receive immediate protection from all your creditors:

• Collections stop
• Penalties and interest are frozen
• Wage garnishments are lifted.

Only a Licensed Insolvency Trustee can negotiate a consumer proposal or bankruptcy with the CRA. Talk to a trustee today to get started.

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