Covid-19: How will the Canada Emergency Response Benefit affect my Bankruptcy?

The Government of Canada recently introduced the COVID-19 Emergency Response Act to help Canadians pay for essentials like housing and groceries and provide additional support to families with children.

When you file a personal bankruptcy, the trustee calculates whether or not you will be required to make surplus income payments based on your net household income.

The Government of Canada annually sets a net monthly income threshold for a person or family to maintain a minimal standard of living in Canada.  Fifty percent (50%) of every dollar that you earn above this threshold is required to be paid by you to your Bankruptcy Trustee (Licensed Insolvency Trustee), which they then pay to your creditors, for each month that you are in bankruptcy. (Details on how surplus income works: What is Surplus Income and How Will it Affect My Bankruptcy?)

The Covid19 Changes

The Canadian Office of the Superintendent of Bankruptcy has announced that any amounts paid to a bankrupt person under the COVID-19 Emergency Response Act will NOT be subject to surplus income calculations. This means that, if you were required to pay surplus income while you were working, you MAY not be required to pay it while receiving the CERB. Please contact your bankruptcy trustee (LIT) to review your specific situation These include the following:

Canada Emergency Response Benefit (CERB)

This is meant to help support workers who lose their income as a result of the COVID-19 pandemic. The benefit covers Canadians who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19, as well as working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures. Additionally, workers who are still employed, but are not receiving income because of disruptions to their work situation related to COVID-19, would also qualify for the CERB. The CERB is available to Canadian workers affected by the current situation whether or not they are eligible for Employment Insurance (EI).

Amounts received under the CERB will not be subject to calculations under the surplus.

GST/HST credit payments

The Federal government will be issuing payments as special top-up payment under the Goods and Services Tax (GST) credit and the Harmonized Sales Tax (HST) credit as additional assistance to individuals and families with low and modest incomes.

Most trustee’s do not take GST/HST credits nor do they factor them into surplus income calculations so most bankrupt individuals should be unaffected as a result of  this extra payment.

Temporary Increase in Canada Child Benefit

Employment and Social Development Canada has announced that eligible recipients will receive $300 more per child with their regular May CCB payment.  It is unclear if this will be every month thereafter of it is a one-time payment. Regardless, bankrupt individuals are entitled to keep the CCB received pursuant to the COVID-19 Emergency Response Act, and these additional payments should not be included as property or income pursuant to the Bankruptcy and Insolvency Act.

Other COVID-19 Relief Payments

Licensed Insolvency Trustees are being told to interpret the enacting legislation providing other COVID-19 relief payments, for example from provincial governments, as the same as those received from the Federal Government.

Support payments received as a result of COVID-19 measures are meant to be used by individuals and their families, not their creditors.

Stay safe and healthy. Stay home (whenever possible), wash your hands, and keep your distance from those around you. These are stressful times but no one should feel alone with these challenges. We really are in this together.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.

• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.

• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy. We will ensure that you understand how all options may impact your assets, including if there is any risk to your home.

• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.