How Debt & Disability Often Go Hand in Hand
Financial difficulties can crop up in anyone’s life, especially when health problems arise. For many, one day they’re fine, the next, they’re unable to work. In such scenarios, some people might have disability insurance or savings to fall back on. Others might not be as lucky and have to rely on benefits like those provided by BC Provincial persons with disabilities (PWD). In both situations, dealing with debts can be a daunting task. This article aims to provide a comprehensive guide to understanding and managing Debt and Disability.
“The intricacies of finances can become even more complex when dealing with a disability. Every step taken towards understanding and managing this can make a significant difference.”
Understanding Disability Income and Insurance
There are several potential income sources for individuals who become disabled and cannot work. These might include:
- Short-term disability benefits from your employer;
- Medical Employment Insurance;
- Long-term disability benefits from your employer;
- Private disability insurance;
- Canada Pension Plan disability;
- BC Provincial disability assistance (PWD).
For those who have recently become disabled, it’s crucial to review each of these potential income sources to determine eligibility and figure out the best option for their situation.
Note: Drawing disability payments from multiple sources without written approval might lead to a large repayment requirement when discovered. Hence, it’s advisable to be cautious.
Another possibility for relief is to check if any of your debts like a mortgage, car loan, credit card, or installment loan, have an insurance component that continues payments if you’re unable to do so due to disability or health issues. Though qualifying for such disability insurance can be challenging, it’s worth exploring, especially if you’ve already paid the premiums.
The Role of Income Tax
Becoming physically disabled or suffering from any other medical disability brings a few income tax considerations into the picture.
People often qualify for a disability tax credit, which can be applied to personal income tax returns, resulting in a larger income tax refund. If you haven’t done this yet, you can apply for an adjustment to your prior years’ taxes by filing a T1 adjustment request with the Canada Revenue Agency.
To ensure this is done correctly, it’s recommended to consult a professional with experience in personal income tax filings, such as a CPA. You shouldn’t need to shell out a considerable sum or hire a consultant to make this request.
Before consulting the tax specialist, you’ll need to get a T2201 disability tax credit form signed by your doctor. It’s advised to fill in as much as possible before bringing it to your doctor.
Further, if you’ve spent money on medical expenses or had to travel outside of your community to see a specialist, these expenses can also be an income tax deduction on your personal tax return, provided they amount to a significant sum.
Earnings During Disability Payments
While some disability payments can be sufficient to meet your needs, others might be minimal and barely cover your monthly living expenses.
For those who are able, it might be possible to work part-time while receiving disability income. People receiving BC persons with disability income have an annual earnings exemption, which allows them to earn approximately $1,000 per month. When combined with the disability payment, this could be enough to manage finances.
Moving Ahead
If your financial situation is already precarious, becoming disabled can make it even harder to manage your debts. However, the Federal Government has programs to help reorganize your finances. Filing a Consumer Proposal has become a popular way to consolidate unsecured debt in Canada. This has to be filed via a Licensed Insolvency Trustee.
As part of a Consumer Proposal, or a Bankruptcy filing, there are two mandatory financial counselling sessions. During these private sessions, professionals help set up a budget and provide advice about managing finances in the future.
Next Steps
Dealing with debt and finances is better done sooner rather than later. The longer you wait, the worse things can get.
If you have a debt load and are disabled, take advantage of a no-cost initial appointment so professionals can review your options. They can examine your situation and provide advice on the next steps.
Filing a Consumer Proposal or a Bankruptcy in Canada is designed to offer protection from debts and a fresh financial start for the honest yet unfortunate. Contact professionals today to set up your appointment, and they will take the time to answer all of your questions.
