Should struggling retirees consider going bankrupt?
The number of Canadians filing for bankruptcy protection in retirement has soared in recent years, according to the Office of the Superintendent of Bankruptcy Canada.
The share of insolvent consumers among people aged 55 and older has more than quadrupled in the past decade, sneaking past 20 per cent.
Not only do seniors have limited ability to earn income, most are reluctant to discuss money troubles openly, leaving them stranded when debt burdens grow overwhelming.
But, for older people, bankruptcy is usually not a particularly good choice, says accountant Douglas Hoyes, a licensed trustee in bankruptcy.
Most retirees don’t need to file for bankruptcy since the main reason for considering it is to ward off creditors that threaten to garnishee wages or seize assets – something they generally don’t have.
Without employment income, there may not be much to work with – particularly as it’s very difficult for a creditor, other than Canada Revenue Agency, to garnishee a pension, Hoyes says.
His advice for retired people in financial difficulty is as follows ... first, consider talking to a non-profit credit counselor for impartial advice. Second, if you are still considering bankruptcy, search out a bankruptcy trustee.
Third, if you decide to try to avoid bankruptcy, consider opening a new bank account, with a new bank, so that your existing creditors cannot access your account. Have your pension and other income deposited to your new account, and pay your rent and other monthly bills (but not debt payments) from the new account.
Finally, when the creditors phone, simply tell them you are on a pension and can’t afford to pay, and hang up. Eventually they will stop calling. If that’s too stressful, you could change your phone number to a new, unlisted phone number so they can’t contact you, he suggests.
Has anybody you know gone this route? Would you do the same if circumstances demanded it?
By Gordon Powers, MSN Money