Can't Repay Your CEBA Loan? Your Options Before December 31, 2026

Last updated: July 2026. CEBA repayment status and CRA collections figures are drawn from Export Development Canada and Government of Canada reporting. Check with your lender for your specific balance and terms.

If you borrowed through the Canada Emergency Business Account (CEBA) and cannot repay by December 31, 2026, you are not alone — and the situation is more serious than most borrowers realize. Approximately 70,000 CEBA borrowers representing roughly $3.4 billion in outstanding balances have already moved into Canada Revenue Agency collections, according to Government of Canada reporting. The CRA has federal collection powers that most private creditors do not: it can garnish wages, seize bank accounts, and register property liens without going to court first.

Quick answer: The CEBA repayment deadline is December 31, 2026. Unrepaid balances become CRA debt subject to federal enforcement. Incorporated businesses can restructure via a Division I Proposal under the Bankruptcy and Insolvency Act, which stops CRA collection action immediately. Sole proprietors can include CEBA in a personal consumer proposal. Get a Licensed Insolvency Trustee assessment before the September–October rush, when LIT capacity tightens ahead of year-end deadlines.

What Is the CEBA Loan and What Is the 2026 Deadline?

The Canada Emergency Business Account was administered by Export Development Canada (EDC) in partnership with Canadian financial institutions — RBC, TD, Scotiabank, BMO, CIBC, and hundreds of credit unions. The program issued interest-free loans during 2020–2021 to approximately 900,000 Canadian businesses to cover fixed operating costs during COVID-19 restrictions.

Loan structure:

• $40,000 initial loan — up to $10,000 forgivable if repaid by the original deadline
• $20,000 expansion — up to $10,000 additional forgivable on the expanded amount
• Maximum loan: $60,000 — up to $20,000 forgivable at the revised deadline of January 18, 2024
• Post-deadline balance: full remaining amount converted to a 2% annual interest term loan with a final repayment deadline of December 31, 2026

The forgivable portion deadline has passed. If you did not repay the qualifying amount by January 18, 2024, the full outstanding CEBA balance is now a repayable debt. It is accruing interest at 2% annually and is due in full on December 31, 2026.

What Happens If You Default on a CEBA Loan

When a CEBA loan is not repaid by December 31, 2026, the balance is treated as a government receivable and transferred to the Canada Revenue Agency for collection under Section 224 of the Income Tax Act. This matters because the CRA’s collection powers are broader than those available to ordinary commercial creditors.

A private creditor must sue you, win a judgment, and then enforce. The CRA moves directly from assessment to enforcement. This is why CEBA defaults carry more urgency than a missed bank loan payment of the same size.

According to the Canadian Federation of Independent Business (CFIB), 14.5% of remaining CEBA holders as of late 2025 reported they would not have the liquidity to repay by the December 2026 deadline — approximately 130,000 businesses are at risk.

Options for Incorporated Businesses

If your business is incorporated, a personal consumer proposal or personal bankruptcy does not cover the business’s CEBA debt. The corporate entity is the borrower, and the options are at the business level.

Division I Proposal

A Division I Proposal under Part III of the Bankruptcy and Insolvency Act (BIA) is the primary restructuring tool for incorporated businesses. It works similarly to a consumer proposal but applies to corporations and to individuals with debts exceeding $250,000.

What a Division I Proposal does:

• Triggers an automatic stay of proceedings under Section 69 of the BIA — CRA collection action stops immediately upon filing
• Allows the business to propose a reduced repayment plan to all unsecured creditors, including the CRA
• Must be filed and administered by a Licensed Insolvency Trustee (LIT) licensed by the Office of the Superintendent of Bankruptcy (OSB)
• Creditors vote on acceptance — the CRA votes as a creditor and the proposal must receive acceptance from the majority of creditors representing two-thirds of the total value of claims
• If accepted, the business repays the agreed amount over the proposal period and avoids bankruptcy

The stay of proceedings is the critical mechanism: once filed, the CRA cannot continue its collection activity — not garnishments already in place, not requirements to pay already served on banks.

Corporate Bankruptcy

If the business’s debts are too large for a viable proposal, voluntary corporate bankruptcy under the BIA discharges the corporate entity’s debts and provides an orderly wind-down. Corporate bankruptcy does not automatically affect the personal credit or personal assets of shareholders unless personal guarantees were signed.

Companies’ Creditors Arrangement Act (CCAA)

For larger incorporated businesses with more than $5 million in debt, the Companies’ Creditors Arrangement Act (CCAA) offers a court-supervised restructuring process. This applies to fewer CEBA borrowers by number but covers some of the larger outstanding balances in the manufacturing, hospitality, and retail sectors most affected by pandemic shutdowns.

Options for Sole Proprietors

If you operated as a sole proprietor or partnership, you are personally liable for the CEBA loan — there is no corporate shield. This means your personal assets, wages, and bank accounts are exposed to CRA enforcement.

A consumer proposal is filed through an LIT and triggers the same s. 69.3 stay of proceedings that stops CRA collection. For sole proprietors with manageable personal income but an unworkable debt load, a consumer proposal often results in paying back 30–50 cents on the dollar over 5 years.

Personal Guarantees: The Hidden Exposure

When CEBA was disbursed through individual financial institutions, some lenders added personal guarantee clauses to their loan agreements as a condition of funding. If you signed a personal guarantee on a corporate CEBA loan, you are personally liable for that portion of the outstanding balance regardless of the corporate structure.

Review your original CEBA loan agreement for any language referencing “personal guarantee,” “guarantor,” or “joint and several liability.” If a personal guarantee exists, an incorporated business’s Division I Proposal does not automatically release you from personal liability — you may need a concurrent personal consumer proposal or negotiated release.

The Timeline: Why You Should Act Now, Not in November

Year-end insolvency filings in Canada peak in Q4 as deadline-bound borrowers act late. Licensed Insolvency Trustee capacity tightens in October through December. A proposal or bankruptcy filing that takes 3–4 weeks in July may take 6–8 weeks in November when LIT practices are managing end-of-year volume.

The Business Development Bank of Canada (BDC) offers refinancing options for CEBA balances. Some credit unions have created dedicated CEBA term loan products. If your business is fundamentally viable and the CEBA is the primary outstanding problem, refinancing through BDC or a lender is worth exploring alongside the insolvency assessment. The two are not mutually exclusive — knowing your restructuring options makes you a better-informed borrower when negotiating refinancing terms.

What a Licensed Insolvency Trustee Does for a CEBA Problem

A Licensed Insolvency Trustee is federally licensed by the Office of the Superintendent of Bankruptcy and is the only professional in Canada authorized to file a consumer proposal or bankruptcy under the BIA. LITs are regulated by the OSB under the Bankruptcy and Insolvency General Rules.

The initial consultation is free. The LIT reviews:

• Total debt load (CEBA plus any other business or personal debt)
• Business structure (incorporated vs sole proprietor)
• Whether a personal guarantee exists
• Monthly income and cash flow
• Whether a proposal is viable or whether bankruptcy is the more appropriate outcome

There are no upfront fees for filing. LIT compensation is governed by the OSB Directive and comes from the estate or proposal payments, not from a retainer charged to the debtor before filing.

If you are one of the 70,000 CEBA borrowers already in CRA collections, the stay of proceedings from a filed proposal stops that collection activity. Money already remitted to CRA before filing is not automatically returned, but all enforcement after the filing date stops.