The problem with carrying debt into retirement is that it must be serviced with less income than when seniors were working full-time. This can lead to a financial burden after retirement that you may not be able to afford. You are not alone. Today 12% of all insolvencies in Canada are filed by people aged 60 and older.
Seniors facing overwhelming debts have unique issues compared to younger Canadians:
- most are on a fixed or reduced income;
- they may need to protect assets like their home and RRSP’s since they will have little ability to replace these investments before or during retirement.
Keeping Your Home Equity
Mortgaging the equity in your home is a big risk if you do not eliminate all of your unsecured debts and you cannot keep up with all of your debt payments.
A consumer proposal is a way to consolidate and deal with all unsecured debts and keep your home.
Protecting your RRSP
RRSP’s and RRIF’s are excluded from seizure in a bankruptcy or consumer proposal with the exception of contributions made within the last year. Since most seniors are no longer making RRSP contributions this limitation may not apply.
Since your retirement funds are already protected by bankruptcy law, it is important that you talk to a bankruptcy trustee before draining your retirement savings to pay off debts.
Pension income is not considered wages and as such cannot be garnished by your creditors. If your only source of income is your pension, and you do not have other assets like a home or investment, bankruptcy may not be necessary as you may be considered to be ‘creditor proof’.
The only exception is a garnishment by Revenue Canada for outstanding tax debts. The CRA can garnish your pension income at any time.
Stop Collection Calls
A bankruptcy or a consumer proposal does stop collection calls and eliminate your debt. Some seniors prefer to file bankruptcy in order to eliminate the stress of handling these calls. Since their income is limited, they are not subject to surplus income and their bankruptcy is usually completed within 9 months.
Get a Personalized DEBT FREE PLAN
At Hoyes, Michalos we offer everyone a FREE, no obligation, professional consultation in all our Ontario locations.
Our licensed experts will review the details of your individual situation and help you decide if a bankruptcy or consumer proposal is indeed the correct debt relief option for you.Get A Free Case Evaluation