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Senior Debt Levels - What to do?
The Globe and Mail reports today increases in senior debt levels and that there is a 6.5% increase in average debt for consumers aged 65 and older, according to Equifax which is increasing their debt faster than any other age group in the past year. British Columbia has the highest level of consumer debt in the second quarter increasing to $36,150 per consumer.
As a federally licensed Trustee in Bankruptcy and Chartered Insolvency and Restructuring Professional, in Victoria British Columbia, we are seeing the increase in seniors who are carrying record amounts of debts. As part of our review of how to help them manage their day to day financial lives we review their personal situation to determine if they are in need of a formal debt repayment plan or simply need to restructure their monthly budget. The following is some general advice that we find is helpful to those trying to balance their budgets.
1) Develop a monthly budget;
This step is crucial to begin to understand what is being spend on a monthly basis and where if anywhere expenses can be trimmed.
2) Government Grants:
Seniors who are struggling should be sure they are getting all of their benefits. i.e. Seniors in BC can have a portion of their rent paid on a monthly basis through the "SAFER" program. Further, some seniors can opt to take early CPP (although with a penalty). Consider applying for the federal Guaranteed Income Supplement and Disability Tax Credit if you qualify . These are credits and payments that need to be applied for and not automatically given by the government.
3) Seniors are often “House Rich” but “Cash Poor”.
Seniors may have options to sell some or all of their house to their children or family members to give them a source of cash flow, (non-formal reverse mortgage). Instead of incurring expenses sources of debt like those on charge cards, the senior can take out debt, like a line of credit which is usually the cheapest form of debt, which can be used for living expenses. We also encourage seniors to downsize (sell their house) or alternatively use their extra space in their residences to generate income (i.e. exchange students, rental accommodation etc.) that can provide much needed monthly needed cash flow.
4) Medical Costs.
As we age we have a greater need to access the health care system. As a matter of cost savings we encourage seniors to move closer to the major health care delivery areas to reduces the costs of transportation and give them access to public transportation.
5) Prescription Drug Costs:
Always ask your doctor for free samples and/or to prescribe the generic version of your medication. Also, if a senior or anyone is burdened by large prescription drug costs, we recommend finding pharmacies that have loyalty programs. Even if Fair- Pharmacare picks up the costs the prescription, the "purchase" can often be reflected on the loyalty program which can result in cash on in-kind benefits. And always compare dispensing fees between pharmacies as these can vary widely.
Finally, if a senior is struggling with debt and are concerned about having their income garnished, we always consider the nature of their income. Pension income is exempt from seizure, which means that creditors such as credit card companies cannot garnish this income at its source and thus seniors who are only receiving CPP/OAS cannot have their income garnished. The major exception to this rule is if you owe Revenue Canada.
Seniors have options like others who cannot repay their debts such a more formal arrangement called a consumer proposal with a Trustee, which eliminates their interest completely and writes off the majority of the debt. Or, as a final alternative, then personal bankruptcy may be considered. With either alternative, seniors in British Columbia can protect their personal assets from creditors including $5,000 in a car, $10,000 in tools of the trade
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