CERB Debt Repayment and CRA Garnishment Options 2026

If you owe CERB repayment debt, CRA treats it as unsecured tax debt with full collection powers including wage garnishment up to 50 percent, and you have four repayment options: negotiate a payment plan up to five years with interest continuing at three percent, apply for Taxpayer Relief to cancel penalties and interest only (not principal), file a consumer proposal to reduce debt by 60 to 80 percent with 97 percent acceptance, or file bankruptcy to discharge 100 percent of CERB debt. Most Canadians with CERB debt combined with credit cards or other obligations choose consumer proposals because filing stops CRA garnishment within 24 to 48 hours while eliminating 60 to 80 percent of all unsecured debt including CERB overpayments. No dedicated CERB forgiveness program exists in 2026, making consumer proposals and bankruptcy the only options providing substantial debt reduction beyond penalties and interest.

Understanding how CRA collects CERB debt and comparing repayment options helps you choose the fastest path to eliminate debt and stop collection actions.

How Does CRA Treat CERB Debt?

CRA treats CERB overpayment as unsecured tax debt subject to the same collection powers as income tax arrears, GST and HST balances, and CPP or EI contributions. CRA can issue a Requirement to Pay for wage garnishment up to 50 percent, freeze bank accounts without notice, register liens on property, and seize assets—all without obtaining court orders. Federal collection authority under the Income Tax Act supersedes provincial creditor laws requiring judgments before enforcement.

Collection escalation follows standard CRA processes. You receive three to four demand letters over 90 to 180 days requesting full CERB repayment. If you do not respond or arrange payment, your file transfers to CRA Collections division. Collections officers call and send final warnings before implementing enforcement actions including garnishment and bank freezes within two to four weeks.

CERB debt follows the same six to ten year collection period as other CRA debt. Provincial limitation acts restricting regular creditors to two to six years do not apply to federal tax debt. Review all CRA debt relief options to compare payment plans, Taxpayer Relief, consumer proposals, and bankruptcy.

Is There CERB Debt Forgiveness in 2026?

No dedicated CERB forgiveness program exists in 2025 or 2026. The federal government announced CERB repayment requirements in 2021 and has not established specific relief programs beyond general CRA Taxpayer Relief provisions. With the 2026 financial crisis creating renewed economic pressure, many Canadians who received CERB during the pandemic now face collection while dealing with current financial challenges. Taxpayer Relief (Form RC4288) is the only CRA forgiveness option available for CERB debt, canceling penalties and interest only while leaving the full principal amount owing.

Taxpayer Relief requires documenting genuine hardship circumstances including job loss, serious illness, natural disaster, or extraordinary financial crisis beyond your control that directly caused your inability to meet CERB repayment obligations. If you’ve recently lost your job and have CERB debt, follow the job loss debt protocol for step-by-step guidance on managing multiple financial pressures. CRA approves 40 to 60 percent of Taxpayer Relief applications. Processing takes nine months for standard cases and up to 48 weeks for complex situations.

Even after Taxpayer Relief approval, you owe 100 percent of the CERB principal amount. If your $10,000 CERB debt includes $1,000 in penalties and interest, Taxpayer Relief saves $1,000 but you still owe $9,000. Consumer proposals reduce the $9,000 principal to $1,800 to $3,600 over three to five years, providing $5,400 to $7,200 in additional savings compared to Taxpayer Relief alone.

What Are Your 4 CERB Repayment Options?

Four CERB repayment options vary significantly in debt reduction, timeline, legal protection, and cost. Payment plans spread full repayment over one to five years with interest at three percent annually. Taxpayer Relief cancels penalties and interest only after nine months of processing.

Consumer proposals reduce CERB debt by 60 to 80 percent with 97 to 99 percent acceptance and immediate garnishment stop through stay of proceedings. Bankruptcy discharges 100 percent of CERB debt in nine to 21 months. Only consumer proposals and bankruptcy provide legal protection stopping CRA collection actions the day you file.

CERB debt included in consumer proposals or bankruptcy does not trigger Section 172.1 high-tax debtor rules. Those rules apply only to income tax debt exceeding $200,000 representing 75 percent or more of unsecured debt. Federal employees affected by 2026 workforce reductions who also have CERB debt should prioritize consumer proposal options that address both their severance situation and CRA obligations. Calculate your specific costs using the CRA tax debt calculator.

Can a Consumer Proposal Eliminate CERB Debt?

Consumer proposals reduce CERB debt by 60 to 80 percent with 97 to 99 percent creditor acceptance rates. CERB overpayment qualifies as unsecured debt included alongside credit cards, lines of credit, personal loans, and other CRA debt including income tax arrears and GST or HST balances. You file through a Licensed Insolvency Trustee who negotiates with all unsecured creditors including CRA to accept partial repayment over three to five years.

A $10,000 CERB debt in a consumer proposal typically becomes $2,000 to $4,000 paid over four years at $42 to $83 per month. If you owe $10,000 CERB plus $20,000 in credit cards and loans, the combined $30,000 reduces to $9,000 to $12,000 paid over four years at $188 to $250 monthly. This total monthly payment is often less than minimum credit card payments alone.

Filing triggers immediate stay of proceedings stopping CRA garnishment, bank freezes, and collection calls the same day. Your employer receives notice within 24 to 48 hours and your next paycheque is restored to full amount. The stay remains in effect throughout your proposal term as long as you make monthly payments.

You keep all assets including your home, vehicle, RRSPs, and tax refunds during and after your consumer proposal. Calculate your potential savings and monthly payment using the consumer proposal calculator.

Is CERB Debt Dischargeable in Bankruptcy?

CERB debt is fully dischargeable as unsecured government benefit debt in bankruptcy. First-time bankruptcy discharges in nine months with no surplus income or 21 months with surplus income based on federal thresholds. Surplus income applies when your monthly income exceeds approximately $2,543 for a single person; you pay 50 percent of income above this threshold to the bankruptcy estate.

CERB debt does NOT trigger Section 172.1 high-tax debtor rules that extend bankruptcy discharge timelines and may require conditional payments to CRA. Section 172.1 applies only when you owe $200,000 or more in income tax (not CERB or other debt types) representing 75 percent or more of your total unsecured debt. Most Canadians with CERB debt owe well under $200,000 and face standard discharge timelines.

Filing bankruptcy creates an immediate stay of proceedings stopping CRA garnishment and collection actions within 24 to 48 hours. All CERB debt is eliminated upon discharge with no obligation to repay. However, you must surrender tax refunds received during bankruptcy and may need to surrender non-exempt assets depending on provincial exemption amounts.

Read the complete guide on filing bankruptcy for CRA tax debt including Section 172.1 thresholds and discharge timelines.

Should You Combine CERB Debt with Other Debts?

Combining CERB debt with credit cards, loans, and other CRA debt in a single consumer proposal or bankruptcy typically saves thousands of dollars compared to paying CERB separately through CRA payment plans. Consumer proposals reduce all unsecured debt proportionally by 60 to 80 percent while bankruptcy discharges 100 percent regardless of debt composition.

Example comparison for $10,000 CERB plus $20,000 credit cards totaling $30,000 in unsecured debt:

Single consumer proposals provide one monthly payment addressing all unsecured debt simultaneously. The legal stay of proceedings stops collection from CRA and all other creditors immediately. Monthly payments are fixed and never increase even if your income rises during the proposal term.

Bankruptcy discharges CERB, credit cards, loans, and other CRA debt simultaneously in nine to 21 months. Total cost depends on trustee fees and surplus income payments if applicable. Use the CRA tax debt calculator to compare combined debt scenarios for your situation.

How to Stop CRA Garnishment for CERB Debt

Three methods stop CRA garnishment for CERB debt with different timelines and outcomes. Filing a consumer proposal creates an immediate stay of proceedings the day your Licensed Insolvency Trustee files electronically. Your employer receives notice to stop garnishment within 24 to 48 hours through registered mail or direct trustee contact, and your next paycheque is restored to full amount.

Filing bankruptcy provides the same immediate stay of proceedings stopping garnishment within 24 to 48 hours. CERB debt is fully discharged in nine to 21 months along with all other unsecured debt. The stay prevents CRA from resuming garnishment throughout your bankruptcy period.

Negotiating a payment arrangement with CRA may pause garnishment but provides no legal guarantee. Call CRA Collections at 1-888-863-8657 to propose monthly payments based on your income and expenses. CRA assesses your financial situation and may suspend garnishment during compliant payment plans, but garnishment resumes immediately if you miss payments or CRA determines your offer is insufficient.

Only consumer proposals and bankruptcy provide guaranteed garnishment stops through legal stays of proceedings that CRA cannot override. Learn how CRA wage garnishment works including Requirement to Pay mechanics and federal garnishment limits up to 50 percent.

Bottom Line

CERB overpayment is treated as unsecured tax debt giving CRA full collection powers including Requirement to Pay for wage garnishment up to 50 percent and bank account freezes without court orders. No dedicated CERB forgiveness program exists in 2025 to 2026; Taxpayer Relief cancels penalties and interest only (not principal) after nine-month processing with 40 to 60 percent approval for documented hardship. Consumer proposals reduce CERB debt by 60 to 80 percent with 97 percent acceptance while stopping garnishment immediately through stay of proceedings, and bankruptcy discharges 100 percent of CERB debt in nine to 21 months. Combining CERB with credit cards, loans, and other CRA debt in a single consumer proposal or bankruptcy saves thousands of dollars versus paying CERB separately through payment plans at three percent interest while other creditors pursue collection.

Use the CRA Tax Debt Calculator to compare payment plan, consumer proposal, and bankruptcy costs for your CERB debt combined with other obligations.

This article provides general information about CERB debt and CRA collection and should not be considered legal or financial advice. Consult a Licensed Insolvency Trustee or tax professional for advice specific to your situation.

Last updated: February 2, 2026