Senior debt: what is the best pathway to debt relief?

Posted on 29 October 2021

Written by Gillian Goldblatt

What is senior debt?

In Canada, senior debt is the term given to senior citizens who are carrying debt or struggling with overwhelming money worries. A growing number of senior citizens are struggling with unmanageable debt and unable to afford their monthly bills, which can quickly spiral into senior debt. This can lead to collection calls, which adds to the stress and anxiety of debt. Unlike Canadians debtors in other age groups, most seniors will not have a significant income to repay their debts due to retirement. It can therefore become difficult to know where to turn and what to do next. In recent years, senior debt has increased because retirement benefits rarely grow in line with inflation and the cost of living. In addition, RRSPs have notoriously low interest rates at present. For this reason, a lack of savings can see many seniors turn to credit cards or payday loans for additional funds. It is therefore hugely important to try to repay your debts ahead of retirement, or indeed to speak to a Licensed Insolvency Trustee for advice.

How can you prevent senior debt?

There are a few key ways in which you can work to prevent senior debt, both before retirement and afterwards too:

Preventing senior debt before retirement

  • Have a backup plan for situations outside of your control. This includes instances of redundancies for older workers, where having some savings to fall back on can help with an unexpected reduction in income, and in some cases, subsequent senior debt.
  • Aim to save as much as reasonably possible to go towards your RRSP to increase your post-retirement income.
  • Credit card debt can accumulate over a lifetime, so it is always sensible to monitor your debt and speak to a Licensed Insolvency Trustee if you need help gaining credit card debt relief.
  • Be conscious of the risks associated with taking out payday loans and the high interest rates often associated with repayments.

Preventing senior debt after retirement

  • Ensure to live within your means. With the extra leisure time you will have in retirement, it can be tempting to spend more, but it is crucial to remain within a budget.
  • Be wary of how much you help your family financially. As a parent or grandparent, it can sometimes be expected that you can help your family financially, including cosigning on loans or mortgages. We all want to help our families, but you should be aware of the risks that come with doing so.

Is it possible to gain debt relief from senior debt?

As with any kind of debt, there is always a way to gain debt relief. The same goes for senior debt. No matter how overwhelming or unmanageable your debt, there is always a solution. The most important thing is that once you recognize you have a debt problem, you arrange to speak to a Licensed Insolvency Trustee. As the only professionals in Canada legally able to file both a consumer proposal and bankruptcy, they are able to offer advice on the full range of debt solutions. The sooner you reach out, the sooner they can help you and start you on your journey to a fresh financial future.

What do you do if you have senior debt?

First of all, you should familiarize yourself with the signs that you are struggling with senior debt. These include having a growing debt balance, only being able to make minimum payments on your debts, relying on lines of credit to make your living expenses, or even considering exchanging your RRSP to make debt repayments. At this point, you should book a free consultation with a Licensed Insolvency Trustee immediately. You may already be beyond this point – perhaps you are being harassed by collection agencies, or are struggling to borrow more funds because of a poor credit report. Although it is unlikely that creditors will attempt to garnish your pension, there is some risk on your pension once it lands in your account. This is particularly applicable in situations where you may owe the bank credit card debt or loan repayments, or if you have tax debt. Speaking to a bankruptcy trustee straight away can alleviate your debts sooner than later.

How to gain senior debt relief

As soon as you book a free consultation with a reputable Licensed Insolvency Trustee, they will be able to advise you as to your available options for senior debt relief. It is important to gain advice for your senior debt so that you do not use up your RRSP for debt repayment. At Spergel, we have been helping Canadians gain debt relief for over thirty years and are experienced with helping our clients clear their senior debt. We will work with you to establish the best form of debt relief for you. The debt relief options for senior debt include:

Taking no action

If you have limited assets and think you are able to withstand collection calls which could potentially be harassing in nature, it may be that you choose to do nothing about your senior debt. This is only a feasible option if your only income is your pension, which is unlikely to be garnished. This will not be applicable to tax debt, due to the overruling powers of the Canada Revenue Agency. Otherwise, you can simply tell creditors you are unable to pay and withstand their calls. Learn more in our article on what to say to collection agencies.

Getting credit counselling

Credit counselling can be helpful for senior debt if you are struggling to work out how to repay your debt. With either a Licensed Insolvency Trustee or a non-profit credit counsellor, you can work together to establish a reasonable amount for you to afford each month. They will then work to create a repayment plan for you for up to five years, and may even reduce your interest rate. If you have a limited income and perhaps have small debts, credit counselling could be a helpful debt relief option for you.

Filing a consumer proposal

A consumer proposal is the only legal form of debt settlement in Canada. Only administered by a Licensed Insolvency Trustee, they will work with you to establish an affordable monthly repayment amount for you. They will then negotiate with your creditors on your behalf, working to reduce your senior debt by up to 80%. Consumer proposals are a great bankruptcy alternative, allowing you to keep your assets and are ideal if you have a higher pension income. They also legally prevent your creditors from contacting or harassing you through a stay of proceedings. At Spergel, we have a 99% acceptance rate of consumer proposals.

Filing bankruptcy

If you have a limited fixed income post-retirement, and not much in the way of assets, filing bankruptcy could be the most suitable option for you. Bankruptcy is the process of assigning your non-exempt assets over to a Licensed Insolvency Trustee. They will use these towards the repayment of your debts, in exchange for clearance of any remaining senior debt you have. Bankruptcy enables you to begin a fresh financial future, stops collection agencies contacting you, and has a number of other advantages.

If you are worried about your senior debt, there are plenty of debt relief options to enable you to enjoy later life free from overwhelming debt. At a time of your life when you want to relax and spend more time with friends and family, senior debt is the last thing you need. Book a free consultation with Spergel today for a review of your financial situation and advice on the best forms of debt relief for you. You owe it to yourself.


Gillian Goldblatt

Gillian Goldblatt is a Chartered Professional Accountant and Insolvency and Restructuring Professional. She is also an award-winning LIT (Licensed Insolvency Trustee) and Vice-Chair of the Ontario Association of Insolvency & Restructuring Practitioners Board. As Spergel's resident expert on debt consolidation and financial literacy, you can find Gillian being interviewed regularly on popular Canadian news programs when she's not at the office helping individuals and businesses get back on track.

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