Banka: Are grandma and grandpa about to go bankrupt?

One-third of our population is over 55 so [about] one-third of the people who filed for bankruptcy in 2013, were over 55.

According to recent reports in the news, an increasing number of seniors are filing for bankruptcy.

The most recent Statistics Canada report which covers the years 1999-2012—meaning even though the report was just published, its already three years out of date—indicates that the debt in families increased by four per cent over these years. Seniors’ debt during this period increased by 16 per cent.

In 2013, 69,000 people filed for personal bankruptcy. People in general are taking on more debt.

One-third of our population is now over 55 so it is probably safe to assume that one-third of 69,000, or 23,000 of the people who filed for bankruptcy in 2013, were over 55.

How does this happen? Most seniors are finding that their limited pension, Canada Pension and Old Age Security are just not keeping up with inflation.

Most seniors continue to drive, live in their homes and find that costs of maintaining their vehicles and homes are increasing. Then, added to that are the increasing costs of health issues.

Most seniors are considered a good risk by creditors because their income is stable even though it is limited and seniors want to repay their debt and will sometimes go to great lengths to keep up with their bill payments, even using payday loans to pay them.

This also makes seniors a great target for scam artists, such as those telephone scammers who have been posing as officers of the Canada Revenue Agency.

One debt avenue is the ability to borrow against the equity in your home. When a senior dies, the lending institution will either need to be paid out or will take possession of the home for the value of the loan.

The lending institution will not lend 100 per cent of the value of the home, so there is always some work for the executor of the estate in this situation. Many lending institutions will set up large lines of credit with the house as collateral, which is very similar to the home equity loan. Before you get into a home equity loan situation, seniors may want to have a family meeting and discuss their situation with their children because a home equity loan will affect their inheritance.

Setting up a budget to handle  necessary and discretionary expenses as well as matching up any other required payments to your income is also wise.

Perhaps it may also be time to consider downsizing and moving out of the large house with the large maintenance into a townhome, mobile or apartment, or even into the basement of the home of one of your children.

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