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CERB Overpayments – Insolvency

June 22, 2020

CERB overpayments are going to be an important topic in the next year for millions of Canadians.  The Federal Government’s handling of the CERB benefit has resulted in many people receiving benefits they should not, or ought not, to have had.  Our office has heard of several cases of long term ODSP recipients who have received CERB benefits on top of their ODSP benefits even though they had no other source of income during the past year.

It has also been reported to us that ODSP administrators have been advising benefit recipients to file claims for the CERB even though they did not qualify.  There are two methods for application, one is online and the other by telephone.  We have been advised that the telephone method, although plagued with long wait times, is the easiest path to benefits, simply answer four questions and “the cheque is in the mail”.

While the government needed to get funds out quickly to assist people losing jobs as a result of their lockdown, they could, and should, have implemented a strategy to back check applications.  They could also have made the programme less confusing for applicants.  The qualifying criteria has been a little confusing for the most sophisticated among us – sadly, many applications have come from people with disabilities and low levels of education (as in our example).

It is yet to be determined how the government is going to finally deal with the multitude of overpayments.  They did try to push through an omnibus bill (Bill C-17) that would create a series of penalties including criminal penalties for fraudulent claims.  The Bill was stalled by the opposition on first reading.   Nonetheless, the proposed penalties include:

The penalty set for each act or omission listed above may not exceed three times the amount of a CERB payment for a week that falls within the application period.

A person who acts in a manner described will be guilty of an offence; however, no prosecution for an offence may be instituted if a penalty for that conduct has been imposed.

Every person guilty of such an offence is liable on summary conviction to:

A fine not exceeding $5,000, plus not more than double the amount of the CERB payment that was or would have been paid as a result of committing the offence; or

Both the fine and imprisonment for not more than six months.

Clearly a person on ODSP who usually receives $2,800 per month for himself, his spouse and two teen aged children (aged 15 and 17) is not going to be able to repay the monies received.  Clawing back the family’s monthly disability benefits ad infinitum is not helpful either.  But what of the minors?  In some cases, they too have made application and received the benefit.  Now, here’s a family of disabled people collectively receiving $12,000+ per month for the duration of the CERB.

It breaks out like this: $2,800 for ODSP; $1,200 for Child Tax Benefit; $2,000 each ($8,000) for CERB benefits.  On top of which the family received a top up of Child Tax Benefit and HST with “one-time” payouts.  If they receive the benefits for the full term, they will have significant and insurmountable liabilities.  For five months of benefits they will first be assessed for taxes on income received $5,200 (for the family) then they will have to repay $120,000 as a penalty for the amounts received. 

If the government proceeds with its plans, to either deem the overpayments a fraud or criminalize the receipt of the benefit, the debtor will not be able to take advantage of insolvency proceedings to find relief.  The government will either create eternal hardship for these people or be forced to (eventually) completely write off the receivables.