disability and debt

A recent Canadian Survey of Financial Security found that people with disabilities, or who have spouses with disabilities, held 25% less in assets, not including housing. In accordance, they are less able to save for hard times or retirement. With the added stresses of a pandemic many are struggling.

Today’s podcast features Derek Chase, Licensed Insolvency Trustee talking about disability and debt. Debt is debt whether you are disabled or not, but there are programs and tax benefits specifically set up to help.

Topics covered include:

  • Short and long term disability insurance
  • Earning money while on disability
  • Repossession laws and consequences of stopping your payments on a secured loans
  • Disability tax credits
  • When to seek the advice of a Licensed Insolvency Trustee

Licensed Insolvency Trustees are federally regulated and approved by the Canadian government. With their extensive knowledge of financial services, they will give you honest advice and help you find a solution to your debt problem.

Wayne Kay  0:04  

Welcome to the Debt Matters podcast, where we help Canadians find solutions to their debt with Licensed Insolvency Trustees from across Canada. I’m Wayne Kay. And in today’s show, we’re going to be talking about disability and debt problems. How common is it to see a person with disability in debt? What can that person do to handle their debt? 

We’re going to dive into why disability can sometimes cause debt. We’re also going to learn when you should deal with your debts if you are disabled. And finally, we’re going to discuss if there’s any insurance products available to help with a person with disability. 

My guest today, Derek Chase with Derek Chase and Associates, Licensed Insolvency Trustee serving Vancouver Island, Sunshine Coast and the north coast of BC. Derek, thanks for being here.

Derek Chase  0:55  

It’s my pleasure, Wayne, looking forward to it. 

Wayne Kay  0:58  

Well, interesting discussion, because there are a lot of tax implications, etc. When we’re dealing with disabilities. And today, we’re going to be talking, as I mentioned in the intro, all about disability and debt problems. So when you’re talking about disability regarding this topic, what would that mean?

Derek Chase  1:19  

I think disability is a fairly general term that can categorize a lot of different things. But where we see it – is a disability that is preventing a person from working. And when that occurs, your income becomes limited, or modest. As a result, depending on the timing of that disability, when it occurred, it can really throw a wrench into your finances. 

I think it’s important that we explore this topic a little bit, because there are some solutions surrounding disability that can help depending on the timing of the onset of the disability. But, just information surrounding this is important, because, I mean, it’s hard to make ends meet when you’re working full time. And then if all of a sudden you’ve got a disability happening, it can be a real challenge.

Wayne Kay  2:13  

And so you’re also talking about, let’s say, could it be a medical issue as well, that takes you out of the workforce?

Derek Chase  2:19  

Oh, 100%. I mean, there’s a variety of different reasons that cause people financial hardship, but certainly a health related problem is one of the biggies. That’s one of the big topics that we see where virtually anyone could be working along, and then all of a sudden, they receive some sort of medical diagnosis that just totally takes their working career off the rails. And if that’s happened, and if you don’t have adequate safeguards in place, then your finances are going to be in jeopardy, for sure.

Wayne Kay  2:54  

And that’s a very difficult one, because you can’t really plan for it.

Derek Chase  2:57  

No, you can’t. And no one really ever expects that type of thing. And if it happens, like I say, and you’re not adequately insured, or prepared –  it’s just impossible to keep going on the same type of financial pathway,

Wayne Kay  3:13  

We often talk about how when someone has debt problems, they’re not the only one. It’s fairly common for a lot of people to get into situations where they’re needing the help of a Licensed Insolvency Trustee. So how common is it to see a disabled person in debt?

Derek Chase  3:31  

I’ll certainly say it’s not uncommon. It’s difficult for me to put into some type of relative terms because I don’t know how many people are disabled in the province or the country. But it is fairly common to see someone come in to talk about their finances, where they are receiving Persons with Disability Income from the province, and that’s referred to as PWD. 

It’s a level of income that on its own is super hard to make the month work just by covering your basic housing and living costs. And then if you throw in the need to make some debt payments on top of that, it’s just a recipe to go deeper into debt. So if that’s the type of disability that is disability income a person’s getting, that’s a real tough one. 

Another type of disability income we see as if a person does have some insurance and they’re receiving either short term disability proceeds from their insurer or long term disability proceeds. In those situations, the level of monthly income tends to be a little bit more robust because you can choose some of those – make choices surrounding how much disability insurance you’re buying to cover that possibility.

Wayne Kay  4:58  

Right. So when you talk about handling your debt, what are some of the options for a person of disability who’s not making ends meet at present?

Derek Chase  5:11  

Well, I think there’s a couple different angles that a person should look at. And, again, it’s a little bit difficult to put out a general statement on that. Because if you’ve been disabled for 20 years, it’s different than if you’ve been disabled for one year. 

But certainly, if a person had been sort of going along, and then all of a sudden their income changed due to health reasons or an accident – then all of a sudden you’re receiving disability from, say, the province, and you’ve got debt. One of the first things that jumps to mind is to review those debt products to see if there was any insurance component with it. And sometimes debts, when you get it, they also offer you the possibility of acquiring insurance to cover these sorts of possibilities. 

So that’s one one point is check if the debt product that you’ve got does have some sort of disability insurance, coverage with it. And I don’t think that’s the easiest thing to make happen, but it’s certainly worth checking out.

Wayne Kay  6:20  

But it is an option through the banks, especially for something like a mortgage. And if this is being taken care of by doctors, that obviously does help that makes a difference. But you’re right, it is not an easy thing.

 I know somebody who was just diagnosed with ALS, and they’re still waiting. You would think that something like that, it would be very quick that they would get help, but not the case.

Derek Chase  6:48  

You know, it can just be difficult to get proceeds from insurance companies in general. The waits and qualifying and potentially arguing with them, that’s a challenge. Another possible way to help with your finances, if you’re receiving income from Persons with Disability, in BC anyway, is they do allow you to earn some money, in addition to your money that you get from the province. And that number changes, it’s hard to be hard to give that number accurately. But I believe it’s up to $15,000 a year that you could potentially earn and still receive your persons with disability income. 

So even if you said, I’m going to make $1,000 a month, because I can only physically work for four hours a day before my disability stops me from working. I mean, that’s a way that you could possibly make it happen is just to take on that job that you could do for earning $1,000 a month.

Wayne Kay  7:57  

I assume this is kind of a difficult thing to answer. But it is difficult for a lot of people. And I don’t know what the stats are. But I know they’re fairly high of people living paycheque to paycheque, and we’re living in that stage. It could be just buying toys as well, that we are all about that monthly payment. And as long as there’s an extra $100 at the end of the month, so that we have everything taken care of, then we’re fine. 

But all of a sudden one of these situations happens and it throws somebody over and they start putting money on and the debt starts increasing, increasing, increasing. Let’s talk about that for just a few moments, about how that definitely affects your debt when you’re not able to work and make those payments.

Derek Chase  8:48  

Well, that’s a good point. There are different types of debts that people have. I think what you’re referring to is debt on a toy. We would call that secured debt. Some lender that has lent you money to buy a SkiDoo or motorcycle or something that isn’t absolutely vital to the daily life that you’re living in British Columbia. You can stop paying on that debt. And if the lender chooses to repossess that their collateral, then that’s all they can do to you. They can’t continue to collect for the shortfall if they weren’t able to sell the collateral for enough to pay off the debt. 

So it’s definitely a way that you can free up monthly cash flow by stop paying on one of those secured loans. And in our experience, the lenders do tend to repossess the asset, especially if it’s relatively new and in decent shape.

Wayne Kay  9:42  

I had no idea. I did not know that. So I’m glad I asked. I was thinking it was the consumers fault for overextending themselves but it’s still a consumer. You don’t want to be that tight that you can’t make ends meet, you’re very very close paycheque to paycheque but yet you’re buying all the ATVs and the snowmobiles and whatever different toys that people have. And so really, they just can repossess it, but that’s pretty much it.

Derek Chase  10:11  

That’s a law that varies from province to province, but in BC it’s generally referred to as seize or sue – the lender can’t do both. And like I say, in our experience, they tend to seize or repossess. Yes, in theory, they could choose not to, and just try and collect the debt from you, that’s a possibility. But if you don’t have any other means for them to collect from yes, then you’re pretty safe in having them repossess it. 

It does apply to automobiles as well in British Columbia, but it doesn’t apply to mortgages. So if a person didn’t pay their mortgage, and their house was repossessed, or foreclosed upon and there was a shortfall, then the lender can pursue the former homeowner for the shortfall. But when it comes to vehicles, it’s not uncommon to talk to somebody that might have two vehicles that have some really big payments. You think of the car and the money cashflow going out every month on that. Do you really need to have two, no probably not. And you could let one go. And that’s going to really help with the cash flow going forward.

Wayne Kay  11:22  

I was talking with a car financer, and he was mentioning that the average is about $1,000 bucks a month for some of the car loans that he sees regularly. And as you mentioned, a lot of people have two car loans going on. That very simply, it could be $1,600 to $2,000 or more per month, which really makes the eyebrows raise. It’s scary to even think about it.

Derek Chase  11:49  

Oh, that’s just nuts. You have to really think about the cost of transportation there and how much you’re paying all in for your transportation. And if your vehicle payments start off at $700, 800, 900, 1,000, you’re deep into transportation costs. And I would challenge people to figure out what they could change to bring that transportation cost way down. 

But, I suppose that circles back in our conversation about disability again. If the disability is just kind of coming on, it’s starting, you take a hard, hard look at your monthly expenses and say, where can I change? And letting go of one of those assets that has a secured lender is definitely a possibility. 

Wayne Kay  12:35  

At what point should you deal with the debts when you are a person with a disability?

Derek Chase  12:42  

Well, I suppose it’s just like any other type of debt, the sooner you get information on it, the better. The longer you let it go, the bigger the hole tends to get. And maybe a Licensed Insolvency Trustee can see some of these options in your situation that could help even for things that you can do on your own. 

It’s well worth having that set of eyes, take a look at your finances and just speak from experience and say, Hey look, this needs to change here or this needs to change there. And then maybe you can make this happen. Maybe you should take on that part time job. 

Another really important thing I think, for people to know about Wayne, is that there’s a strong income tax deduction, when you have a disability. The disability tax credit is a big deduction. And not only can you get it for this year, but if your disability was in the past a little bit, you technically qualify for this disability tax credit, you can retroactively go back on your taxes and ask for an adjustment for the disability tax credit. It can provide a pretty sizable tax refund. That’s both for you as an individual and if you had a dependent in your household that was disabled. So that’s another helping point for a person that has a disability situation in their household. 

Wayne Kay  14:07  

What about people that are aging and something comes on? I know a lot of people who have actually ended up losing their sight. They have an eye degeneration and are unable to see anymore and therefore not able to work. But you kind of have to hit the certain limits when the government will then say okay, yes, we now recognize this as a disability.

Derek Chase  14:33  

Well yes, qualifying to get disability income is a hurdle for sure. And like you said earlier that starts with your physician and having the documentation to say yes, this is a disability. This person can no longer do their work or or can no longer function on a day to day basis without assistance. You know, there’s different thresholds that have to be proven before, either an insurance company will start paying or whether the province will start supporting you. And, you know, that is a good safeguard, I guess, so that the system is not abused. You want to have a legitimate disability before you start getting those funds in. 

Or maybe if it’s a workplace accident. Each province has a program – WorkSafe BC or WCB, it used to be called. So there are these insurers that are out there that can help. It just depends how much you get out of it, get from them, and whether it’s on a timely basis or not. And can you bridge that time until you get it without incurring too much debt. 

But if you do get too much debt, then there’s these federal options that we always talk about. What we do every day, whether that be a Consumer Proposal, or a Bankruptcy filing that can shut the door on that old debt and let you live into the future with your disability income, even if it is modest.

Wayne Kay  16:03  

And you were mentioning a little bit about insurance products. Are there any other ones that you can think of that would would be perfect for somebody with a disability,

Derek Chase  16:13  

If it’s a work related accident or disability, there’s the WorkSafe BC. If you are able to acquire or buy an insurance policy for long term disability or short term disability, now, while you’re healthy, that’s something that some employers automatically enroll you in. Other times you have to buy that independently. 

And if none of those are available, and you’re no longer able to work, then it’s either provincial disability, or Canada Pension Plan also has a disability program. Both the Canada Pension Plan disability and the provincial disability – it’s not a lot of money. It’s not going to be more than $1,500, I don’t believe or $1,400 range. So if you’re paying rent out of that, it’s a pretty skinny month.

Wayne Kay  17:11  

Absolutely. So let’s wrap this up with your final comments regarding persons with disability and debt problems.

Derek Chase  17:19  

Again, it’s just one of those things where you have to acquire as much info as you can take a look at your options, as far as getting rid of some payments that you don’t need. Take advantage of the insurance that is available to you and take advantage of the tax credits that are available to you. And like anything else, just do the best you can.

Wayne Kay  17:38  

Yes, terrific. And if they’re in and they feel like there’s a lot of pressure regarding debt, they can always reach out for that free consultation, just like us just chatting here on the podcast. 

You mentioned something I didn’t know before. And so you would have saved somebody just from listening to this – many hundreds of dollars, possibly per month – just with that one great idea about how they can repossess something. So I think it’s well worth it for them to make the call Derek. It’s always a pleasure. And I thank you very much for being on the show and sharing all this great information. 

Derek Chase 17:50

You’re welcome, Wayne anytime. 

Wayne Kay 18:00

My guest today Derek Chase. You can learn more and schedule a free consultation with Derek Chase and Associates Licensed Insolvency Trustee at the website, bankruptcytrusteebc.ca. 

And that’s it for today’s Debt Matters podcast. Make sure you subscribe wherever you get your favorite podcast from. And of course for more information, you can always check out our website at debtmatters.ca Thanks very much for listening.

About Derek Chase

Derek Chase is a Licensed Insolvency Trustee in British Columbia. He has been helping individuals and corporations restructure their debt since 1997. His areas of practice include personal and corporate insolvency including Consumer Proposals and Bankruptcy. The best part of his work is to be able to witness lives change for the better when the heavy burden of unmanageable debt is lifted.

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