How to Deal With Debt & CERB Payments
The COVID-19 pandemic has not only been a health crisis but also an economic one, forcing millions of people to seek financial assistance. In Canada, the government introduced the Canada Emergency Response Benefit (CERB) to provide temporary financial support. However, understanding the intricacies of CERB and dealing with debt during this crisis can be challenging. This guide aims to help you navigate these issues.
CERB: A Lifeline Amid Chaos
When the pandemic struck, many found themselves out of work or with significantly reduced income. To address this, the Canadian government introduced the CERB.
CERB is a taxable income benefit that provides qualifying individuals with $2,000 per month (or $500 per week) for a maximum of four months. This initiative was designed to bridge the gap for Canadians who do not qualify for or cannot access Employment Insurance (EI) benefits.
However, one cannot collect both CERB and EI concurrently. If you qualify for EI but have not yet applied, you can apply for CERB first. You may become eligible for EI after CERB benefits expire.
CERB Eligibility Criteria
To be eligible for CERB, you must meet the following conditions:
- Be a Canadian resident.
- Be at least 14 years old.
- Have earned a minimum of $5,000 in 2019 or in the 12 months prior to applying.
If your employment situation remains unchanged from when you first applied, you can reapply for CERB for multiple four-week periods, up to a maximum of 16 weeks or four months.
CERB Application Process
To apply for CERB, you can:
Complete the online form through your CRA MyAccount; or,
Call the CRA automated toll-free line at 1-800-959-2019 or 1-800-959-2041.
Setting Up CRA Direct Deposits
If the CRA has your bank account information on file, CERB will be deposited directly into your account. If not, or if you prefer not to set up direct deposit, you will receive your CERB payment by cheque.
Strategies for Managing Debt
In these uncertain times, it’s crucial to have a plan for managing your debt. There are both formal and informal options available, and the best solution depends on your individual circumstances.
Informal options include negotiating with your creditors for lower payments or interest rates, and asking your bank about debt consolidation.
Formal options, provided under the Bankruptcy and Insolvency Act (BIA), include filing for bankruptcy or a consumer proposal.
Regardless of the option you choose, an important first step is to schedule a consultation with a Licensed Insolvency Trustee to discuss your financial state and available options.
Navigating CERB with Multiple Part-Time Jobs
Many people, like healthcare providers, juggle multiple part-time jobs. If one of these jobs has been affected by COVID-19 and you’re earning more than $1,000 from the other, it’s important to note that you are not eligible for CERB. However, there are other options:
- Contact your lenders or financial institutions to inquire about relief programs.
- File your taxes, especially if you’re expecting a refund.
- Make a budget to understand where your money is going and identify potential areas for cost reduction.
Impact of GIC Interest and CERB Eligibility
If your primary source of income is interest from Guaranteed Investment Certificates (GICs), it’s important to note that GIC interest income does not qualify for CERB. Eligible income is limited to employment (e.g., salary) and self-employment income.
Financial Relief for Teachers
For teachers who normally supplement their income with a summer job, it’s important to note that you won’t qualify for CERB if you continue to be employed as a teacher and receive more than $1,000 a month from your employer. CERB is designed for those who have lost their job due to COVID-19 or related issues.
Are My Savings Deposits Safe?
For individuals with savings deposits in both Canada and the U.S., the risk of bank failure resulting in a loss of those funds is very low. Both countries have deposit insurance, with the FDIC in the U.S. insuring up to $250,000 per owner and CDIC in Canada insuring up to $100,000 per account type.
Financial Relief for Small Businesses
If you’re a small business owner with a small payroll, you may qualify for the Canada Emergency Business Account (CEBA) loan of $40,000 at zero per cent interest, with 25 per cent of the loan forgiven if repaid under the terms provided. The minimum payroll amount to qualify is $20,000.
Alternatively, self-employed individuals may qualify for CERB if they earned a minimum of $5,000 before taxes in the last 12 months and don’t expect to earn monthly income (under $1,000 per month) due to COVID-19.
Claiming Work from Home Expenses
If you and your spouse are both working from home, you may be eligible to deduct a portion of certain home office expenses, such as utilities. The amount you can claim is usually based on the square footage of your home workspace divided by the total finished area of your house.
Navigating the Canada Emergency Response Benefit (CERB) and dealing with debt during COVID-19 can be complex. However, with the right information and careful planning, you can manage your finances effectively during these challenging times.
