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What You Should Know About the Canadian Emergency Response Benefit (CERB)

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In response to the effects of the coronavirus, the Government of Canada introduced a new relief benefit called the Canadian Emergency Response Benefit, or CERB, which provides a supplementary source of income $2,000 per month, for Canadians in need. Jamie Golombek of the Financial Post writes that “ the federal government has processed 8.4 million applications for the CERB and paid out a total of $19.8 billion to Canadians in CERB payments” between the months of March and April.

Unlike traditional Employment Insurance, CERB is specifically designed for Canadians aged 15 and older whose income has been directly affected by the COVID-19 pandemic. According to the Financial Post, CERB will cover Canadians from “Mar. 15, 2020 to Oct. 3, 2020, and provides eligible applicants $500 per week for a maximum of 16 weeks.” CERB is accessible to many individuals who would not be eligible for EI during imposed lockdowns, like self-employed or contract workers.

What Happens After You Apply for CERB?

Although the application process for CERB is relatively simple and designed to get you the support you need as quickly as possible, we have noticed that many people are unsure about what happens next. Our Licensed Insolvency Trustee and Insolvency Administrator have found that, for the most part, individuals who are collecting CERB have two common concerns:

1.     Are CERB payments garnishable?

2.     Are CERB payments taxable?

If you’re an individual who has been affected by the pandemic, understanding some of the nuances of collecting CERB can help you find a greater sense of personal and financial security during this time of crisis. As an expert in bankruptcy and consumer proposals, our Licensed Insolvency Trustee (LIT) can provide you with the terminology and information you need to gain confidence and insight both before and after applying for CERB.

1.     Are CERB Payments Garnishable?
There’s a simple answer to this question: No. CERB payments are not garnishable. If the term garnishable is entirely new to you, it’s important to note that a wage garnishment allows a lender to take a portion of a borrower’s wages if that borrower is in debt to the lender. The garnishment allows for a portion of the debt to be taken directly from the borrower’s paycheque until the debt is repaid. This also applies to situations in which the borrower’s wages are held by a third party.

CERB is specifically designed to ease financial strain that citizens may experience from layoffs, medical bills, or loss of childcare or other services. The funds you receive are to be used for your own financial support  and cannot be garnished. But, keep in mind that there will be some exceptions to this rule: For example, if you owe your bank money, the bank has the right to use any deposited CERB payments to offset your debt for that account.

2.     Are CERB Payments Taxable?

Yes, CERB payments are taxable. According to Global News and the Government of Canada, Canadians should be prepared to pay taxes back for their CERB payments when they file their 2020 income tax. Although taxes are not automatically deducted from existing CERB payments, and you should receive the full $2,000 for the time being, you will have to pay taxes on the amount you collect. Of course, there are exceptions to taxation: An individual whose annual income is around or below $12,000 per year, and students who are eligible for the education tax credit, will likely be exempt from paying back taxes on their income from CERB. The total tax you owe also depends on what tax bracket you’re in and what province you currently file your taxes in. You can give yourself a general idea of what you will owe by adding your CERB payments to your annual income and by using an online tax calculator to assist.

How We Can Help

If you’re worried about upcoming bills and applying for CERB, the last thing you want to think about is managing your debt, or the possibility of bankruptcy. If you’re unable to make ends meet, a Licensed Insolvency Trustee at Crawford, Smith & Swallow Inc. can assist you with proposal and bankruptcy services to help you take control of your debt. Call us today to book a free consultation, we can help.

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