If you are a Canadian who has been relying on the Canadian Emergency Response Benefit (CERB) to make ends meet since the COVID-19 pandemic began back in March, you are probably aware that CERB has now ended. The Government of Canada has stated that the program will not be extended further, instead relying on an expanded Employment Insurance (EI) program and the new Canada Recovery Benefit (CRB) to support Canadians whose income continues to be impacted by COVID-19.
Unfortunately, there are many people who were receiving payments from the CERB program who will not be eligible for the expanded EI program nor the new CRB. According to an analysis done by the Canadian Centre for Policy Alternatives, 2.7 million people in Canada will receive less money now that CERB has ended. Some aren’t receiving any money at all, even though we are still in the midst of the pandemic, with some businesses having to close again, causing layoffs.
So what do you do about your debt now that CERB has run out?
For many people, getting by on $2,000 monthly was tough, depending on their debt load and what they were making before the pandemic, but what about the 2.7 million people who will now be receiving even less?
Fortunately, you do have options. You may not be able to increase your income to make your current debts manageable, but you may be able to reduce your debts to a level more manageable under your current income situation. Both of the options available to you under the federal Bankruptcy and Insolvency Act, a Consumer Proposal and an Assignment in Bankruptcy, allow you relief from your debts, through a system that is based on what you can afford for payment, not on what the banks think you should pay.
A Consumer Proposal is an offer to your creditors to settle your unsecured debt for an agreed upon amount, paid over a maximum of five years. This proposal is made to all of your unsecured creditors. Consumer proposals can only be filed through a Licensed Insolvency Trustee (LIT). The creditors use a variety of different criteria, much of which is proprietary to them, to decide whether or not they will accept the settlement that you are proposing. Through our experience, we have a good sense of what the creditors will accept in your unique situation and can guide you to an agreement that is beneficial for you and acceptable to your creditors. Any offer that you propose would reflect your current circumstances in a world with COVID-19, and be based on what you can comfortably afford to pay in these uncertain times now that CERB has ended.
A bankruptcy is a legal process that you assign yourself into, in exchange for relief from your debts. The goal of entering into the bankruptcy process is the extinguishment of your unsecured debts, which happens when you are discharged from bankruptcy. For a first time bankruptcy, this can be as soon as 9 months after filing the assignment. In order to obtain your bankruptcy discharge, you may be required to make payments, known as “surplus income payments” into a trust fund established by your LIT for your bankruptcy estate. These surplus income payments are entirely based on the income earned by you and the other members of your household.
Each year the Office of the Superintendent of Bankruptcy, within the Government of Canada, establishes guidelines based on their calculation of how much money households of various sizes require on a monthly basis, in order to maintain a basic standard of living. Any funds earned in a month that are in excess of this amount are considered to be surplus funds, and half of the surplus income must be contributed to the bankruptcy estate. Because this surplus income amount is based on your household earnings, not the quantity of your debt, the nature of your debt, or the interest rates on your debt, these payments are more reflective of what you have the ability to pay, not what the lender thinks you should be paying. This means that if your government COVID-19 assistance is lost or reduced, or your hours at work are reduced further, your LIT would recognize your change in circumstances and your payments into the bankruptcy would decrease accordingly.
The world is a different place than it was when you borrowed the money
As you can see, both Consumer Proposals and Bankruptcies may be viable solutions to the debt problems of those people whose income was reduced as a result of the COVID-19 pandemic, and who had been relying on CERB to get by. Now that CERB has run out, leaving an estimated 2.7 million Canadians receiving reduced payments, and some receiving no payments at all, it may be time to consider restructuring your debt to better reflect your current circumstances.
As we seem to be in the midst of the “second wave” of COVID-19, with new records for daily cases being set, it is unlikely that things will return to normal for a very long time. The world is a different place than it was when you borrowed the money that you now owe. What once was manageable may now be impossible to repay. Fortunately, Canadian legislators foresaw the need for legal methods to adjust someone’s debt to match their changed situation and created the ability to file Consumer Proposals and bankruptcies. Both of these provide a mechanism to restructure your debts to amounts that you can afford in today’s world, rather than the amounts that you and lenders thought you could afford when you took the loans, credit cards, and other debt products.
Only Licensed Insolvency Trustees have the legal ability to file Consumer Proposals and Bankruptcies, so they are the best people to turn to for debt advice if you are worried about what will happen now that CERB has ended. L.C. Taylor and Co. Ltd., Licensed Insolvency Trustees, provide free, no-obligation consultations, either in person or by telephone. During your consultation, we will review your current situation and offer our honest opinion of what options make sense for you. If your life has changed due to COVID-19, you deserve to find out how your debt can be changed too.