Seniors in Debt Turn to Bankruptcy and Consumer Proposals to Get Out of Debt
In 2010 over 90,000 Canadians made the difficult decision to file for bankruptcy while more than 40,000 Canadians decided to file a consumer proposal. Senior citizens made the majority of these filings.
While it is true that the economy in Canada is in better shape than many other countries, the Canadian government is routinely warning Canadians about their use of credit. They have even gone so far as to change some laws (like mortgage lending laws) to detour the trend of over borrowing/lending.
The Bank of Canada released a survey at the end of 2010 that revealed that household indebtedness rose during the recession. The report came with a warning; credit growth needs to slow down. This is just one of many reports that show that Canadians are carrying debt loads much larger than previous generations ever did. In today’s society, when a financial crisis occurs, such as a job loss, medical problem or divorce – it is easy to turn to credit to bridge the gap.
So why are seniors in financial crisis turning to bankruptcies and consumer proposals to get out of debt?
– The cost of living continues to rise dramatically
– Many seniors are retiring on fixed incomes that barely cover their rent
– The recent recession has allowed companies to easily layoff their older workforce. A workforce that has seniority and accrued pensions (union or not), and this is done with no recourse whatsoever
The issues above make it difficult for your average Canadian to save and prepare for retirement especially when many are relying on credit to maintain their standard of life, pre-retirement. If it was hard to make ends meet with more income “pre-retirement” then just imagine how hard it would be to make ends meet on a low and fixed income. Now also consider retiring with no assets.
Picture yourself or your parents in this scenario. What would they do? What if you were not in a financial position to help them? If this is the case all is not lost, there are options that provide immediate debt relief to seniors struggling with debt. These options include bankruptcy and consumer proposal, they could also involve additional or other forms of financial counselling.
A senior’s choices will largely depend on whether or not they have assets, who they owe money to and the amount of debt that they owe. Their children will also impact their choices; specifically their children’s financial standing and their ability to contribute financially. The last thing a parent wants to do is leave a mountain of debt to their children. Some seniors file for bankruptcy in secrecy to protect their children in the event that they pass away, not wanting to leave their kids with a financial mess to clean up. This is a hard but noble and respectable choice.
For a senior citizen their credit score and credit report becomes less important post-retirement. The ability to borrow becomes impaired because of the senior’s “new” type of income and also because of their age (similar to how insurance companies behavior and attitude changes with a client’s age).
The truth of the matter is that a large percentage of bankruptcy and consumer proposal filers are seniors and it is largely due to the fact that these two options provide the fastest form of immediate debt relief.