In the case of homeowners still paying off mortgages, selling makes sense if there is enough equity and the proceeds can be used to discharge debts. Renting would be an option.
Hoyes recommends bankruptcy only if the following alternatives are not viable:
Option one is simply to do nothing, which may be appropriate for seniors with few assets and who receive only employer and government pensions. They can open a new bank account at a bank where they don’t owe money.
Second is a consolidation loan, but the credit crunch has made this harder.
Third is credit counselling, which is viable for those with moderate amounts of debt. This involves fully paying all debts but creditors may waive interest charges, Campbell says.
If truly over your head, you may consider a consumer creditor proposal, a legally binding settlement where you negotiate a repayment schedule with creditors. They may accept less than the full amount owing, because partial payment would be more than they would get if you resort to one of the last options –bankruptcy.
A typical consumer proposal might be on $50,000 of debt on credit cards, bank loans, payday loans and back taxes. If unable to pay the full amount plus interest, the debtor might offer $350 per month for 48 months, or roughly a third of the original debt.
That may sound tempting but Ms. Campbell warns your assets can’t exceed the amount in the proposal. So if total assets, including home equity, exceed $50,000 in the example above, creditors wouldn’t accept a mere fraction of that.
Warren Baldwin, regional vice president with T.E. Wealth, cautions that going bankrupt is no day at the beach. “You have to toe the line on spending. I see it as a negative. It sticks on your credit history and affects the ease with which you get credit in the future. Bankruptcy is no panacea to solve your problems.”
There may also be repercussions for potential future employment in the case of those still young enough to return to work.
Keywords: poverty, seniors
