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Bankruptcy After Retirement: Do Retirees Need To Go Bankrupt?

Unfortunately it is possible for people of all ages to get into financial trouble, and retirees in Canada are no exception. Once you retire your income goes down but expenses like rent, groceries and utilities may not, which can leave you in a financial bind. As a result, seniors may resort to credit cards and other forms of borrowing to maintain their lifestyle. This debt can cause problems. If you get behind on your debt payments, the creditors start calling, which is a serious nuisance for someone who is home most of the day. Therefore, yes, some seniors do file for bankruptcy after retirement, but do retirees need to go bankrupt? Should you consider bankruptcy?

It is important to realize that bankruptcy eliminates most of your debts, but that is not the reason most people file for bankruptcy in Canada.

For most people, personal bankruptcy is a way to get protection from their creditors (which is why it is often called bankruptcy protection). Protection from creditors means preventing creditors from garnisheeing wages or seizing assets.

Since most people in financial trouble do not have many assets, the most common reason for filing bankruptcy is to prevent a wage garnishment.

If you are retired, you do not have wages, and therefore you do not have wages that can be garnisheed. It is very difficult, if not impossible, for a creditor to garnishee a pension.

Therefore, the answer to the question “do retirees need to go bankrupt” is no – most seniors do not need to file bankruptcy after retirement because usually they don’t need that kind of protection.

Our 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, talk to a Licensed Insolvency Trustee near you.

Third, if you decide to try to avoid bankruptcy, we recommend that you open 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 (phone, utilities) from the new account, but do not make any payments on your debts from this new bank 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 is too stressful, you could change your phone number to a new, unlisted phone number so they can’t contact you.

This is a stressful time, so consider all of your options before you decide on a course of action. Remember, retirees do not need to go bankrupt and bankruptcy after retirement is probably not your best or your only choice anyway.