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Canada’s climb back from the pandemic remains uneven and unpredictable. While there are promising signs and stable case numbers in some provinces, other regions are facing a surge in case numbers prompting new rounds of public health measures, including vaccine passports, limited indoor and outdoor gatherings, and business closures.
Capacity limits and restrictions on gatherings, alcohol sales, nightclubs, and other venues where people get together remain some of the government’s most effective tools against the transmission of COVID-19, but it’s also a measure that affects workers’ livelihoods.
That’s why the government of Canada launched the Canada Worker Lockdown Benefit with its latest budget, at the same time that it wrapped up CERB updates for good with the ending of the Canada Recovery Benefit.
Contact A TrusteeWhat Is the Canada Worker Lockdown Benefit?
Now that the Canadian economy is reaching pre-pandemic levels of employment, the government of Canada is tightening up who qualifies for income supports. Despite complaints from business owners about labour shortages, data shows that Canadians have by and large returned to work, although many have changed sectors.
With that in mind, the government of Canada is retooling its income supports to focus only on those who need it the most. Benefits will now focus on workers whose jobs have been interrupted by government-mandated lockdowns.
The benefit provides affected Canadians with $300 per week. The benefit is available until May 7, 2022, and retroactively to October 24, 2021, as appropriate. Workers can access this benefit for the duration of a government-imposed lockdown that affects their employment.
Who Is Eligible for the Canada Worker Lockdown Benefit?
The new Canada Worker Lockdown Benefit is strictly available to those whose work is interrupted by government-imposed lockdowns. It can be accessed by workers whether they are eligible for Employment Insurance or not, but those who are eligible for EI cannot claim benefits for that time period.
The benefit is not available to workers whose loss of income or employment is a refusal to adhere to vaccine mandates. With 62% of Canadian companies planning to implement vaccine mandates, this is a growing concern, but the Canada Worker Lockdown Benefit only applies to employment interrupted by a lockdown order.
The government is moving toward more targeted supports as the Canadian economy recovers. A number of supports for businesses and employers also ended, except for industries hardest-hit by the pandemic, such as tourism.
Has CERB Ended?
The government of Canada rolled out a wide range of pandemic income supports to help Canadians with their financial planning during lockdowns and unpredictable periods of unemployment. In the early part of the pandemic, the government rolled out CERB payments of $2000 a month. As lockdowns dragged on in parts of the country, CERB became the Canada Recovery Benefit (CRB), which provided out-of-work Canadians who were ineligible for EI payments with $300 per week after the first 21 weeks of eligibility.
CRB payments ended on October 23, 2021, and have now been replaced by the Canada Worker Lockdown Benefit. Many are worried about the effect this will have on Canadians who have struggled throughout the pandemic and who have gone into debt keeping up with everyday expenses.
If you’re not sure what to do now that CRB has ended, book a consultation with David Sklar & Associates. As Licensed Insolvency Trustees in Ontario, we can help you plan your finances and deal with lingering debt.
How to Deal with Post-Pandemic Debts
Although income supports helped millions of Canadians throughout the pandemic, that doesn’t mean people haven’t struggled. In fact, 43% of Canadians added to their debt levels over the pandemic, and an alarming number of households are approaching insolvency.
Rising inflation and cost of living are not making it easier to get ahead on debts. Higher prices for gas, groceries, rent, and essentials make it a challenge to set aside more money. Even after cutting non-essential spending, higher costs for essentials mean you have less money to pay down credit cards, student loans, and more.
We can help Canadians struggling with debt. Get in touch to tell us about your personal financial situation, and we’ll find a path forward from there. The options available to you depend in large part on what kind of debts you’re in.
Credit Card Debts
The pandemic has been a tale of two Canadas when it comes to credit card debt. Households that kept working saw their savings rate go up, as there were simply fewer ways to spend. Going out to restaurants and movies, travelling, and other non-essential spending outlets were shut down, and households used those savings to pay down a total of $16 billion in credit card debt.
But almost half of Canadians added new types of debt, and credit card debt was the most common. Credit cards are among the most readily available types of credit, and many Canadians rely on them to pay for basic expenses when they don’t have enough money in the bank.
They also come with relatively high interest rates that can make paying back the balance tough. If your income hasn’t gone up, making payments can be impossible, and bankruptcy may be your best option. Even Canadians who have since gone back to work may be struggling to find the extra income to repay it all. Canadians who are earning an income but struggling with debt may want to consider a consumer proposal.
Your savings and assets also play a role in determining whether bankruptcy or a consumer proposal is the right path forward for you. Discuss these factors with a Licensed Insolvency Trustee if you’re trying to deal with pandemic debt.
Student Loans
On average, it takes Canadians 9 to 15 years to pay off their student loans. While the majority of Canadian student loans are backed by the government, over a third resorted to lines of credit and bank loans, which can be much more expensive to carry and harder to pay off, as they don’t offer the same relief programs if you can’t afford your payments.
Government-sponsored student loans may not be eligible to be included in bankruptcies or consumer proposals if you’ve recently graduated. In order to include them in insolvency, seven years must have passed since the last time you were a full- or part-time student.
While you may have heard of student loan cancellation after COVID-19 in the United States, the Canadian government did not cancel debt but froze student loan interest rates for a period of time. If you are struggling to keep up with monthly payments, there are other relief programs you can explore.
Private student loans do not have to adhere to the seven-year rule and can be included in bankruptcy or a consumer proposal if you are insolvent and struggling to keep up with your payments.
CERB Repayments
Receiving a CERB repayment letter can be a major shock. In the rush to get CERB out, there were many unanswered questions and misunderstandings about who was eligible and how to apply.
There were cases where Canadians received double payments after applying through both the Canada Revenue Agency and Service Canada, which handles EI payments. The CRA later clarified that applicants who received double payments for the same time period would have to return the amount they received in overpayments.
Other applicants discovered after receiving CERB payments that they were not eligible due to their income. Applicants had to have earned at least $5,000 in the year 2019 or the 12 months prior to applying. A number of sources of income were not considered eligible, including:
- Student loans
- EI payments
- Pension income
- Disability benefits
- Social assistance
This lack of clarity meant that many Canadians who could have benefited from the income support found themselves ineligible after receiving payment. It can prove difficult for Canadians in this position to repay the benefit, leaving them in debt to the CRA.
You may wind up having to repay part of the Canada Recovery Benefit if you exceed Canada recovery limits as well. If you received the CRB, you would have to repay $0.50 on every dollar above $38,000 that you earned for the year, up to the amount of CRB that you received.
Taxes
Another surprise for some Canadians was that CERB payments counted as income and were not taxed at the source. It was up to recipients to set aside a portion of their CERB payments that they would have to return come tax time.
Canadians struggling with bills to pay may not have had the option of setting aside that money and may now owe the CRA. The CRA has widespread collection powers, but tax debt can be included in insolvency if there is a need.
With the launch of the Canada Worker Lockdown Benefit, the Canadian government’s pandemic supports have become more targeted. If you’ve added debt during the pandemic or you’re struggling with CERB repayments, get in touch with David Sklar & Associates to find out what you can do about debt.
