Managing CERB Repayments: What’s the Best Approach?

If you’re one of the millions of Canadians who received Canada Emergency Response Benefit (CERB) payments during the COVID-19 pandemic, you may now be facing the intimidating responsibility of paying some or all of it back. 

Shortly after the CERB program ended in March 2021, the Canada Revenue Agency (CRA) sent out letters to thousands of Canadians who were given the $2,000 monthly CERB payments but were in fact ineligible. 

Around $82 billion was distributed to nearly 9 million Canadians who were able to assess their own eligibility for the program during the application process. This resulted in many people receiving the funds only to discover later that they were not entitled to it under the government’s requirements and are expected to pay it back. 

Debt of any kind can be stressful but the current economic environment, defined by high interest rates and inflation, makes the prospect of owing thousands in benefit repayment to the federal government a daunting task.  

Depending on your financial situation there are a few repayment options to consider. Ultimately, the money will need to be repaid, but there is some flexibility.  

How do I know if I owe CERB repayments? 

Back in 2021, the Canada Revenue Agency (CRA) began sending notices out to Canadians who received the funds but were ineligible.

The CRA will only ever communicate via mail and have warned to be aware of scams targeting CERB beneficiaries that ask for money over text, email, or phone.

If you think you may need to repay CERB payments but haven’t received a letter in the mail, contact the CRA directly.

What if I can’t pay back what I owe? 

If you’ve received a notice of repayment from the CRA but aren’t able to pay the outstanding debt, there are a few options you can consider.

First, contact the CRA; they can help you arrange a timeline to pay off what you owe. If that is unsuccessful, you may be eligible to write off the debt if you’re in a position to file Bankruptcy or Consumer Proposal.

The government of Canada has committed to working with Canadians who owe CERB repayments on a case-by-case basis so contacting the CRA directly to explain your situation and come up with a payment plan may be the best option for you.

Most importantly, speak with a non-profit Credit Counsellor or Licensed Insolvency Trustee (LIT) like MNP Ltd. if you’re dealing with overwhelming debt and are looking to regain control of your financial situation.

Set up a payment plan

If the amount you owe is something you can realistically pay back but aren’t able to pay off all at once, contact the CRA directly to discuss payment options.

The government has said that they will assess repayment on a case-by-case basis and are willing to be flexible. Use that to your benefit and reach out to determine the best course of action for you.

It’s important to note that if you’ve made a payment plan and you fail to make a payment, there could be consequences. Be realistic when creating a payment plan and schedule and be sure to keep open lines of communication with the CRA should you not be able to make a payment on time.

File a Consumer Proposal

If you’re unable to reach an agreement with the CRA regarding a repayment plan and don’t have access to other resources to pay the debt, a Consumer Proposal might be a good option to release you of the debt.

Meet with a Licensed Insolvency Trustee (LIT) to review your situation and determine the monthly debt contribution that’s realistic for you to calculate a fair payment with your creditors, including the CRA.

Once your LIT has filed a Consumer Proposal on your behalf, collection of your debts will stop. Your LIT will then enter a negotiation with your creditors who will take a vote on your proposed payment plan. The proposal approval is dependent on “majority of voting dollars”, which is 50 percent plus one, voting in favour (each creditor gets one vote for every dollar of debt you owe them). If and when they do so, you can begin to make the payments needed to pay off the debt.

You must pay the proposal off within five years but there’s no penalty for paying it off sooner. Consumer Proposals are ideal for individuals with less than $250,000 in debt (excluding a mortgage on their principal residence) who want to keep their assets that may not be protected in a Bankruptcy.

There is another proposal option for larger debt levels. A LIT can discuss that option with you if it’s needed.

File for Bankruptcy

Like a Consumer Proposal, Bankruptcy can release you from your CERB repayment obligations.

Bankruptcy is a bit more involved than a Consumer Proposal in that you will need to submit monthly income and expense reports in addition to attending two budgeting and money management counselling sessions. Payments can also fluctuate with your income earned.

The assets that are protected for you depend on the province and your LIT can help you determine what applies to you.

You can be discharged from your Bankruptcy only if you meet all the requirements set out for you. The process typically lasts 9-21 months for a first-time bankrupt individual and it will remain on your credit report for six years after you’ve been discharged.

Your financial future isn’t set in stone. Knowing the options available to you can help you create a thoughtful and practical plan for your future; one without overwhelming debt.

Visit mnpdebt.ca to learn more about Insolvency options and to connect with an MNP LIT today.

This guest post was contributed by MNP, one of Canada’s leading professional services firms – proudly serving individuals, businesses, and organizations since 1958. Through the development of strong relationships, they provide accounting, tax, and digital services catered to our clients and their individual needs and goals.