Last week we discussed why the majority of seniors are in debt. This week we’ll be addressing if seniors should try and pay off their debts to obtain senior credit card debt relief or declare bankruptcy.
Life is very difficult for many seniors who anticipated that their golden years would be a carefree retirement. Instead, according to the Vanier Institute for the Family, Canadians over the age of 65 have the highest insolvency and bankruptcy rates in the country. With increasing expenses and a significantly reduced income and return on investments, more seniors are contemplating bankruptcy; but is it the best and/or only option?
While it’s true that bankruptcy can eliminate many of your debts, people typically file personal bankruptcy as a means of protection from creditors. If you are working, bankruptcy will protect you from creditors garnisheeing your wages. However, if you are retired and your sole source of income is your pension, then there are no wages to garnishee. It is very difficult for a creditor to garnishee a pension with one notable exception. If you owe the CRA (Canada Revenue Agency) for unpaid taxes, they are permitted to garnishee all types of pension income under Section 224.1 of the Income Tax Act. It is rare that the CRA will garnishee your pension income, but it is a possibility. If you have a significant tax debt and the CRA has threatened a pension garnishment, the bankruptcy process is an option that has to be considered.
The right debt relief option you ultimately decide upon will depend on whether or not you have assets, who you owe money to, and how much you owe. For seniors in debt there are bankruptcy alternatives – credit counselling, debt consolidation, consumer proposals – which in many cases are better options than declaring personal bankruptcy. In our next blog, we will be considering various options, including should seniors file a consumer proposal?
Unfortunately too few Canadians are properly prepared for the financial reality of retirement. They get caught up in a downward financial spiral and some pass away leaving significant debt. The family is then left with the unpleasant options of paying the debt themselves or bankrupting the estate. If you are a senior in serious debt, consult a professional Trustee as soon as possible. Contact Ira Smith Trustee & Receiver Inc. for professional advice and an action plan that’s right for you. Starting Over, Starting Now we can give you the help that you need to deal with your financial problems, and peace of mind.
Watch for our next blog when we’ll be discussing some advice we have for seniors in debt.