It is an unfortunate truth that more retired Canadians are finding themselves deeper in debt. Several recent studies have shown that seniors are increasing their debt levels at a faster rate than the average Canadian. The reasons are many and varied: like many Canadians, seniors may be enticed by low interest rates and are using debt to purchase newer homes or retirement properties. Recent market downturns have reduced investment income for many seniors and savings are providing low returns. Once you retire, your income usually goes down, unfortunately expenses like your rent or mortgage payment, groceries and utilities may not. This can lead to seniors relying more on credit cards or home equity lines of credit to maintain their standard of living. Unfortunately without added income, this debt can cause problems and seniors, like anyone else, can get behind on their debt payments.
Whatever the cause, an increasing number of seniors are looking for professional debt relief. Doug Hoyes, co-founder of Hoyes, Michalos & Associates Inc, one of Ontario’s leading personal insolvency firms and a MoneyProblems.ca advisor, notes:
“Almost 9% of our clients (2011) are over the age of 60, and that is up from less than 7% two years earlier. Our insolvent seniors (60+) are more heavily in debt that the average debtor and their indebtedness is growing: Their average unsecured debt in 2011 was $68,237 11% higher than a year earlier and 10% higher than our average debtor ($62,071).“
Debt Management Advice for Seniors and Retirees
For seniors struggling with debt, there are solutions that provide immediate debt relief. Debt relief options may include talking to a non-profit credit counsellor about a debt management plan or debt consolidation loan. Other choices include negotiating a settlement with your creditors through a consumer proposal or, as a last resort, personal bankruptcy. Whatever your choice, there are some special considerations to talk about with your advisor:
Is Bankruptcy Necessary?
For people seeking protection from their creditors, personal bankruptcy can be an option. Bankruptcy prevents creditors from garnisheeing wages or seizing assets. If you are retired however, you likely do not have wages that can be garnished. It is very difficult, if not impossible, for a creditor to garnishee a pension. Most seniors after retirement do not need the protection offered by a bankruptcy to deal with their debts.
Retirement Funds May Be Protected
If you having savings in the form of Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs), we recommend you seek professional advise in dealing with your debts BEFORE you cash in your RRSP or RRIF. In most provinces, RRSPs and RRIFs in a bankruptcy are now exempt from seizure, with some exceptions.
Choose your advisor carefully.
There are many ‘debt relief programs’ advertised today and not all are equal. Learn what to look for when choosing a debt advisor. In early 2012, the Canadian government, through the Financial Consumer Agency of Canada issued a consumer alert about companies claiming to negotiate a deal with your creditors under the heading of “debt reduction,” “debt settlement,” “debt relief” or “debt negotiation” programs. This warning, entitled: “DEBT REDUCTION COMPANIES: BEWARE OF “TOO GOOD TO BE TRUE” OFFERS” can be found on the the Financial Consumer Agency of Canada (FCAC) at fcac-acfc.gc.ca website.
We recognize that for seniors, carrying too much debt can be stressful. We recommend that you consider all your options before your decide on what solution works for you. Remember, retirees to not need to go bankrupt, there are other solutions that will probably work better. Contact an a expert today for more information about your alternatives.