The journey into retirement is often accompanied by financial challenges. Seniors, especially those grappling with substantial consumer debt, find themselves in a predicament. This pertains to the inability to repay their debt effectively. The reasons for this debt accumulation range from layoffs in traditional industries, financial responsibilities for their children and aging parents, to the inability to keep up with living costs on a fixed income.
Let’s delve into the options, strategies and government programs available for debt relief for seniors.
Recognizing a Debt Problem
Before embarking on the journey to debt relief, it’s crucial to identify signs of a debt problem. If you find yourself continuously using debt to cover your expenses, making minimum payments on your credit cards, or relying on a line of credit to pay your mortgage, rent, or bills, it’s time to consider professional help. Another warning sign is if you’re contemplating cashing in your RRSP to pay off debt.
The Consequences of Non-Payment
If you halt your credit card payments, utility bills, or loan payments, your creditors will take steps to recover the amount. The first indication of this is regular collection calls, which can be stressful, especially if you’re also handling medical or familial issues. Any missed payment leads to a negative mark on your credit report, resulting in higher interest rates on new credit or mortgage renewal. Moreover, any new credit applications could be denied.
Can Pension Be Garnished?
Fortunately, in most cases, your pension cannot be garnished. However, once your pension is deposited into your bank account, your funds could be at risk if you owe money to the bank. The amount can be seized from your account and applied to your unpaid credit card or bank loan. The Canada Revenue Agency (CRA) is one of the few exceptions, and can garnish your pension income for unpaid taxes.
Avoiding Poor Borrowing Decisions
Seniors often carry high credit card balances. If you find yourself using one credit card to live while making minimum payments on another, it’s time to explore the various options for debt relief.
Seniors are also found to be increasingly turning to payday loans. However, this isn’t a viable solution as it puts you at a loss the following month. Also, before considering a debt consolidation loan, be aware that failing to make any refinanced mortgage payment can risk your home.
Seeking Help for Paying Down Debt
If you are struggling with debt, the first step is to consult a regulated debt professional like a Licensed Insolvency Trustee.
Exploring Various Debt Solutions
Debt professionals can review several possible debt solutions with you, including:
- Doing nothing: If you have no assets and your only income is a non-garnishable pension, you can simply tell most creditors ‘I can’t pay’ and do nothing. This can be a good choice if your income is limited.
- Working out a payment plan with a credit counsellor: Non-profit credit counsellors can help you arrange a plan to repay everything you owe over a period of up to five years. They might even be able to stop interest charges.
- Considering government debt relief programs: If you own a home and have some equity, but not enough to refinance, you could make a proposal to your creditors through a government debt relief program called a consumer proposal. This is also an option for those who have a higher pension income or additional income from employment or outside assets.
Filing Bankruptcy
If you are on a fixed income and have little in assets, you might consider filing bankruptcy to stop collection calls. However, not all seniors should file bankruptcy.
Not Draining Your RRSP for Debt Repayment
If you have money set aside for retirement in an RRSP, RIF or pension plan, talk with a Licensed Insolvency Trustee about your options before using those funds to pay off debt. Most registered retirement plans are protected in a bankruptcy or consumer proposal in Canada.
Seeking a Free Consultation
If you are a senior with debt you can’t afford to repay, consider contacting a Licensed Insolvency Trustee for a free consultation. You are not alone.
Debt Relief Resources
- Do Senior Citizens Need to File Bankruptcy?
- Seniors Turning To Payday Loans A Scary Trend
- Seniors – A Small Group Carrying High Risk Debt
- Who Can File a Consumer Proposal?
- Why a Consumer Proposal May Be Your Best Option
Navigating through debt can be a daunting task, particularly for seniors. But remember, you are not alone. By understanding the options available and seeking professional advice, you can find a way through and achieve financial freedom.
Debt relief for seniors: Government programs & options can make the journey smoother. Contact a trustee today and start your journey towards a debt-free future.
