9 – Debt Help: Bankruptcy for Senior Citizens

Wayne 00:04

Welcome to another edition of the Debt Matters podcast where we help Canadians find solutions to their debts with Licensed Insolvency Trustees from right across Canada.

I’m waiting, Kay, and in today’s show, we’re going to talk about seniors and debt. My guest today, Bonnie Hooley, from LCTaylor, Licensed Insolvency Trustee in Winnipeg, Manitoba.

Hi, Bonnie.

Bonnie 00:26

Hi, thank you for having me.

Wayne 00:28

Oh, it’s a pleasure. I love learning and finding out more information about Bankruptcy. And as we’ve seen over the last few years, I think a lot of people have had money trouble. And this is wonderful, because I think people need to know that they’re not alone when they have these kinds of situations happen to them.

Bonnie 00:46

Yes, that’s for sure. If you saw how many people I’ve met with, you’d know that they’re certainly not alone. But they feel like it, don’t they? They really feel embarrassed. And it’s like, I’m the only one going through this problem. But in my experience, financial difficulties can happen at any walk of life, at any stage of life.

Wayne 01:06

That’s really important for us to share, because we feel like you look at your life plan – and not that we have a life plan. But you know, when you started in your 20s, you don’t really have very much. Then eventually, you try to buy a house and then you get married – maybe get married first. And then you go through the career, and then you move on to the kids and all this stressful stuff. And then  eventually, the kids leave and you think that it’s going to be smooth sailing from that point on. But that’s not always the case.

Bonnie 01:37

Unfortunately, it is not. You expect that, in your retirement, you’re going to sail on the deep blue sea. But for a lot of people, you hit road bumps and it’s not that smooth sailing.

Wayne 01:48

And I think it throws people off, because I don’t think they really thought that it would happen. They thought the rocky seas were supposed to happen in their 20s, 30s and 40s.

Bonnie 02:03

Yes, and sometimes it does. But, it’s sort of like your health. It can affect people at any age and financial difficulties – they just come from so many different angles. It can hit you at any stage in your life, even regardless of how well you are prepared for them.

Wayne 02:22

Yes, well, how do you prepare?

Bonnie 02:25

There’s different ways to prepare – particularly for seniors. They save for their retirement, they have their pensions, they have their RRSPs, things like that. And you know, you save for the rainy day, and you do the budgeting and you’re careful your whole life – so you think you’ve done everything. But if something unexpected happens that affects your finances, there’s only so much you can prepare for before life happens.

Wayne 02:53

And this can happen at any stage. As we’ve mentioned, today’s show is really about senior debt. Can senior citizens declare Bankruptcy? And what happens? How common is it for it to actually happen?

So why don’t we start by discussing what are some of the ways that you’ve heard of that people get into having to be at the point where they have to declare Bankruptcy? What are some of the things that happen – those life things?

Bonnie 03:21

Yes, so with seniors, some of the things that are more common are income tax issues. What will often happen is when you retire, you get your pension, and then you might also get some old age pension or Canada Pension. And because they’re coming from three different sources, they’re not necessarily talking to one another.

So you think I’ve adjusted my income, I’m living quite lower than I used to. Then when you file your taxes, at the end of the year, you find out that you owe a bucket of money. And your income tax, because each of those small piles of money were drawing from, weren’t taking enough tax off. So that’s one of the bigger ways that seniors are surprised with debt.

Initially, after, you know, recently after retirement, you can’t always recover from that quickly, because your pile of money is lower than when you were working. And you don’t have the ability that you did when you were younger, to just go out and get a second job or something to help cover these things.

Sometimes it starts to accumulate, because in the first year you’ve got your tax debt unexpectedly, having to pay more taxes and you’re anticipating. Then the next year, you’re now paying the right amount of tax, but your income is now lower and then even lower still because you’re trying to repay the taxes. And then with Canada Revenue agency’s interest in penalties, it can sometimes start to snowball. So one of the common things is a tax debt that seniors can find themselves with.

Wayne 04:56

Wow, okay, I’ve never even heard of that. I’m glad that you mentioned that. I think that’s something we all need to be aware of, as we’re aging. Is there another key point that you want to share with us?

Bonnie 05:07

Yeah, other things that happen to seniors is they’re used to being the patriarch, or whatever, of the family. And so their family comes to them for handouts all the time. So when their income drops from retirement, their generosity often doesn’t drop as quickly as their income does. You’ll find a lot of seniors that are helping out family and friends more than they can actually afford to, and that can sometimes snowball as well.

Another thing that seniors are sometimes susceptible to, is the predators that are out there trying to scam seniors. It’s really horrible that someone would do that to a senior. But it’s not that seniors are not as smart as the rest of us. Because they have life experience – they’re probably way smarter than you and I, but they were raised at a time when you could trust people. And so some of the predators out there and scammers take advantage of that. I’ve personally seen people lose their entire life savings, because the predators and scammers were really good at their fraud. So those are some of the major ways that you’ll see that seniors are affected financially and can lead to financial devastation.

Wayne 06:31

So let’s dive into the solutions regarding Bankruptcy and seniors and debt problems. Is there an age limit? I wouldn’t imagine so.

Bonnie 06:42

No, there is technically no age limit. You could be 105 and need to file Bankruptcy. Hopefully you wouldn’t. But sometimes, as you age, and your financial situation changes, other options might be more open to you.

For instance, if your only source of income is pensions, and you don’t have a house, a car or any assets, you might be judgment proof. So there may be options available to you to just not give up the money that you need for medications, and just stop paying the debts.

There’s ways to deal with creditors in that regard – bankruptcy is an option. It’s an affordable option, because what you’re basically doing is saying to the creditors –  I just can’t pay everybody back. So what you do is you make a nominal payment to the Trustee, who’s collecting on behalf of your creditors. You’re not going to be paying off the entire debt, but you’ll be paying off a small amount that is affordable to you.

Now, there are some seniors that have fairly good pensions, and they have not bad income, and they might even have assets. But the debt load that maybe has accumulated that they didn’t deal with before they retired, hasn’t gone away, or they have things that surprised them. So for those people, if they have a higher income, there’s also a proposal under the Bankruptcy Act, where you’re sort of making a settlement with your creditors. You can do that through a Trustee. And the advantage of doing it through a Licensed Insolvency Trustee is that creditors vote on it. If the majority of the creditors agreed to the settlement, they’re all going to be bound to it by law. So you don’t have one creditor ruining it for everybody else, and you’re able to settle your debts at an affordable rate.

Wayne 08:29

Okay, I think this is one of the greatest things about this podcast is that many Canadians are really learning how a Licensed Insolvency Trustee can help in a variety of ways. And it’s important for people to feel that there’s a place for them to turn to that will give them some advice if they get into a situation where they need help.

Bonnie 08:49

And on that note, my experience with people that come to us is they have browbeaten themselves before they get to us and they expect that when they come here, we’re going to be doing the same.

That’s not the situation at all. We understand that financial issues and devastating things can happen to anybody. We’re not here to make your situation worse. We’re here to help you find solutions. If the solution is that you’re just bad at budgeting, which most people I meet are not – we can help with that.

But we’re going to help you find a solution that’s going to solve the problem and get you back on your feet.

That has long term consequences because not being able to pay your debt and just staying home and worrying about it can shorten your life and can ruin relationships that you have, even the way you spend time with your family. So that’s not the healthiest way, ignoring it and hoping it’ll go away and just trying to deal with it on your own.

Getting help from a professional like a Licensed Insolvency Trustee is a way that you can literally sleep better. I often say we should have an ad that says that – we’re the best sleep center. Because after people meet with me, the most common thing I hear is that they’re sleeping better, because they have a solution. It’s not weighing them down. And we’re able to help them get through it, instead of just carrying that burden on their own.

Wayne 10:20

Yes, absolutely. And is it rare for seniors to file Bankruptcy?

Bonnie 10:28

It’s not as rare as it should be. But it definitely happens. And it happens for some of the things that I mentioned. Seniors are often more hesitant to come in because they think that it’s more embarrassing, and don’t recognize it as the help that it should be. It sort of has negative connotations to it. But it is not rare. And I do meet a lot of seniors, and I’m able to help them. So it’s not that rare, unfortunately, and financial difficulties are very common with seniors, and probably more of them should be seeking help.

Wayne 11:06

So are seniors more affected by Bankruptcy than younger people?

Bonnie 11:11

I guess it depends what you mean by affected. For instance, a younger person who goes bankrupt, is going to want to build back their credit rating and get back on their feet. Often, when you’re in retirement, building your credit rating backup is not one of your higher priorities. In that way, a senior is not as affected.

But morally, they sometimes think that the world’s going to look at them differently. And the reality is that, even though technically, it’s public knowledge, usually people in their own household won’t even know they went bankrupt unless they tell them. So I think it helps everybody in every walk of life. I don’t think it affects them more.

Wayne 11:54

Can we talk about what happens to deaths if somebody passes away?

Bonnie 12:00

Yes, that’s a question that seniors often ask me, because they have friends and family who pass suddenly or take ill and at that age, your chances are increased. Now, if you are a senior and you pass away, your debt does not get passed down to your beneficiaries.

For instance, if there’s a husband and a wife, and the wife passes away, the husband is not liable for any of her debts, unless he is personally guaranteed them, or co-signed them or their joint on them. So that sort of goes away, if you pass, except if you have assets.

For example, if I’m a senior, and I have a house that’s free and clear, and I’ve got a bunch of credit card debt – when I pass, maybe my kids are thinking they’re going to get all the equity in the house. The equity from the house would have to be used to pay off my debt first. Now, sometimes when people pass, they have a little bit of assets – maybe a little bit of savings or a little bit of equity in their home, but their debt is way bigger than their assets. And so then the beneficiaries, or the executors of their estate, wonder what to do, because they don’t have enough money to pay off all their debts – but there are some assets here.

So in those situations, we’ve actually put the deceased estates into Bankruptcy, to help out the executors. They don’t have to worry about whether or not they are paying the limited resources to the right creditors, and they can sort of just wash their hands of it. So in short, the answer is that your debt is not passed on to other people if you should pass away. But sometimes if there’s assets, you need a professional to help you with that.

Wayne 13:52

What a great podcast. I’m so glad you’ve joined me today to talk about all those because it’s been very enlightening. And I hope that a lot of people are feeling a little bit better about debt as seniors and see that there are different options. Do you have some final advice you’d like to share with us on this topic?

Bonnie 14:11

I guess the best advice that I could give is –  if you have any financial difficulty, whether you’re senior or not, don’t keep it to yourself. Don’t try to solve the problem on your own. Talk to a professional. Licensed Insolvency Trustees are there to help the situation, not make it worse.

And we’re not going to charge you to talk to us. You’re not going to be obligated that you have to take their advice or sign up for something. But we are going to be able to help you do a critical analysis of your situation. We’ve been doing this for so many years that we know all the options that are out there to help you. And we’re going to do our best to help you find a solution that’s going to be in your best interest

Wayne 14:55

Terrific. That’s wonderful advice. Bonnie. Thanks very much for being on the show today.

Bonnie 15:00

Thank you. Thank you for having me. It was very nice being here.

15:03

My guest today – Bonnie Hooley from Winnipeg. You can learn more or schedule a free consultation with LCTaylor Licensed Insolvency Trustees. You could do that by heading to lctaylor.com.

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