April 25, 2023
Struggling to support parents with debt? Discover practical ways to help elderly parents manage debt, reduce financial stress, and protect family finances.
Our parents care for us and guide us through life’s challenges, and as they age, it’s often our turn to support them. Caring for aging parents often means helping them manage their finances. Taking on responsibility for your parent(s) finances can be challenging, especially when you discover they have debt.
Many parents may avoid discussing debt with their adult children because they're ashamed of it and want to avoid burdening their children. It’s a conversation you should have to ensure their financial stability, though.
We recently spoke to Licensed Insolvency Trustee (LIT) Rebecca Sudano to find out what to do if you discover your parents are struggling financially.
Rebecca told us a story of one elderly client she helped, a story that’s not that uncommon.
Evelyn (a pseudonym) is a widow in her late 70’s. Her late husband George (also a pseudonym) had run a family business he had inherited from his father. They were a very proud couple.
For much of their marriage the business had done well. But as the couple grew older the business started to run into trouble.
George and Evelyn relied on credit to get by and struggled with budgeting to pay off their debts. George was constantly looking for one more big job that could help reduce their debt burden.
Their debts grew though, and they decided they had to sell their cottage in an attempt to pay it off, but with the family business in decline new debts just appeared.
After George passed away, Evelyn was left to deal with the debt on her own. The couple have two adult children but had never spoken to them about their financial issues.
One day one of their children was at their house when Evelyn got an email related to her debt on her iPad.
“He remembered seeing her face when she opened the email. Her expression completely changed,” Rebecca explained. "He asked what was wrong and it all just came out. She had lots of credit card debt and was just unable to keep up. She had been falling behind for a while.”
Her son did research online and eventually convinced Evelyn to seek professional help. When he first brought her to meet with Rebecca, Evelyn had over $60,000 of unsecured debt.
Evelyn was very nervous about asking for help, thinking it would mean declaring bankruptcy and losing her home and possessions.
“Many elderly clients I meet only know the word bankruptcy and are afraid to come in because of that,” Rebecca said.
Rebecca chose to do a consumer proposal with Evelyn. A consumer proposal is when a Licensed Insolvency Trustee negotiates with your creditors to reduce your debt load. In Evelyn’s case her debt was reduced by 70%. She went from paying $900 a month to just $275.
“She couldn’t believe this was possible and wished she had taken action on her own sooner.”
Most parents have trouble talking to their kids about their debt. There can be signs though.
“If you see lots of unopened bill mail, if they’re suddenly selling their car or their house or the cottage, it can be signs that they’re having financial problems,” Rebecca says.
Parents who have paid bills all their life struggle to admit their worries to others, Rebecca said, so they will attempt to avoid the issue for a long time.
Many elderly clients that Rebecca sees are people who have lost a spouse and have a hard time staying on top of bills after losing their spouse's pension income.
“The loss of a spouse increases costs because they must pay things like the rent and heating on their own. They don’t know what to do to afford the bills.”
There’s something perhaps larger than the income they’ve lost too, Rebecca says. They’ve lost someone close to them they can talk to about financial issues openly.
Once you’re aware that your parents have debt it can be hard to know what to do next, especially if the parents are not interested in asking for help or discussing it further.
Rebecca has a tip for this scenario.
“You have to meet them where they are,” she explains, “help them with resources they understand. Emailing them links isn’t helpful if they aren’t that tech savvy.”
Instead of sending links and other not-so-subtle hints, know the benefits and the solutions available, print out articles that explain debt relief programs, show them that there are options to lower their debt load and overall payments,” Rebecca explains.
You can use language too to connect with them. If they’re thinking of “downsizing” their home to free up money for retirement, ask if they’ve thought of downsizing their debt.
You want to encourage them to reach out and show that there are people who can help them.
If your parents’ debt is manageable, creating a realistic budget can help them pay it off and regain control of their finances.
Start by reviewing their income and expenses together. Identify their fixed costs, such as rent, utilities, and groceries, as well as any discretionary spending like dining out or subscriptions. Prioritize debt repayment by setting aside a specific portion of money to make payments consistently.
Help them focus on reducing unnecessary spending. Suggest practical adjustments like cancelling unused subscriptions or choosing more affordable alternatives for leisure activities.
These small changes can free up extra cash to put toward their debt.
Many parents need more of a push to seek help.
If you realize your parents’ debt has become unmanageable and they’re not reaching out on their own, you may need to take a more active role. That can mean many things, from helping them go through their bills and debts and finding out exactly how much financial trouble they’re in. It may mean helping them create a budget that they can stick to.
Not all financial situations can be solved on their own. If you realize your parent needs professional debt help, you can be with them for the start of that journey. It’s something Rebecca sees a lot.
“Over 90% of the time it’s the adult child who brings them to me,” she says. “More often than not that’s how it works. The parents don’t know how to find resources and so their kid does that research for them and then brings them to meet with me.”
Asking for help is the hardest step Rebecca says, but once that’s done the parents begin to take a more active role themselves.
“The child that brings them to me often doesn’t talk a lot during the first appointment. They’re just there for moral support. We often don’t hear from the child again actually. After that first meeting, the parents feel much less anxious and more comfortable. They just want someone to show them the door.”
A licensed Insolvency Trustee may suggest filing a consumer proposal if your parents have an unmanageable amount of debt.
Your parents must work with a Licensed Insolvency Trustee, like Rebecca, to file a consumer proposal. Licensed Insolvency Trustees are the only professionals in Canada authorized to administer consumer proposals.
The Trustee will negotiate with creditors on your parents’ behalf and work to lower the amount of money owed. A consumer proposal can reduce the amount your parents owe by up to 80%.
A consumer proposal also protects your parents from collection calls, wage garnishments, or legal action while they make affordable monthly payments. Best of all, it allows them to keep all their assets, including car and home.
If your parent has entered a debt relief program it doesn’t mean your job is done. Be sure to check in on your parent. Ask if there’s anything they’re struggling with, are they able to make payments without difficulty or do they need a different debt relief program.
You want to be there to support them as much as possible. The world has changed much from the one they grew up in and they will want your help in navigating it.
Talking about money can be difficult for elderly parents who have never faced financial trouble in their life before. Meeting with a Licensed Insolvency Trustee to go over debts is the best way for anyone with financial troubles to remove stress and worry.
BDO’s Licensed Insolvency Trustees will take the time to fully understand your situation and provide the best debt relief option to fit your unique circumstances. Book a free consultation today.
April 25, 2023
Struggling to support parents with debt? Discover practical ways to help elderly parents manage debt, reduce financial stress, and protect family finances.
