A retired widow facing unmanageable debt decides to declare bankruptcy

Dealing with the death of a spouse is one of life’s most painful moments. It can be difficult to truly prepare for it. Many people report feeling overwhelmed, unable to handle all of life’s pressures on their own. To make matters worse, new financial difficulties often weigh on the surviving partner. Without the right help, money management issues become a burden. In situations like these, when income constraints and unmanageable debt are affecting a person’s well-being, bankruptcy is definitely an option worth considering.

We recently spoke with Nancy Snedden, BDO Licensed Insolvency Trustee, and Yvette Power, the manager from our St. John’s, Newfoundland office about the challenges many people face after losing a spouse. It’s a difficult subject to talk about, but hearing someone else’s story might help you or someone you know who is going through a similar situation.

Nancy and Yvette have many years’ experience helping people who are struggling with debt. They told us about a retired widow who was referred to BDO for help.

A retired widow facing unmanageable debt

Wendy, a pseudonym, is a retired widow in her seventies from St. John’s, NL who was struggling to repay her debts.

Wendy and her husband had been married for 45 years before he passed away. They lived modestly in their rented home and were always very punctual in paying their bills. With two pensions, they were able to get by and even save a little money.

Three years ago, however, when her husband passed away, Wendy’s finances took a turn. Without any inheritance or life insurance to rely on, she was left to survive on a single pension.

Wendy did everything she could to stay afloat. She used up all their savings, gave up on all travel plans and often had to ask her children to help out. It was a very stressful time in her life. She was putting her debt obligations before her own quality of life. She thought this was the right thing to do. Eventually her kids encouraged their mother to speak to a not-for-profit credit counsellor.

Licensed Insolvency Trustees can advise you on all your debt relief options

Meeting with a credit counsellor was a step in the right direction for Wendy.

A reputable credit counsellor can offer a range of services, from one-on-one counselling to group courses or debt management plans (DMPs). DMPs are a service offered by not-for-profit credit counsellors that allow a person to consolidate their debts into one affordable monthly payment. Interest is sometimes forgiven, but DMPs will typically require you to repay 100 per cent of your debts.

Because Wendy’s debts exceeded her means, the credit counsellor referred her to BDO. With the help of a Licensed Insolvency Trustee, Wendy could either pay back a portion of what she owes by applying for a consumer proposal, or file for bankruptcy and eliminate her unsecured debt.

Wendy had a combination of personal and joint debt. She had two personal credit cards ($3,500), two joint lines of credit ($44,000) and a secured car loan.

Bankruptcy worried her because she depended on her car and could not afford to lose it. But she was also uncomfortable with the idea of filing for bankruptcy. How would she be perceived by other people?

Bankruptcy stigma is still an obstacle many people face

In many ways, Wendy is a typical example of a generation that feels guilt about their unmanageable debt.

Many older people who are experiencing a debt problem will avoid seeking help. They suffer with a lot of guilt. Many go to great lengths just to pay their minimum payments, like skipping meals or not refilling their prescriptions. This is what we call bankruptcy stigma. And it’s one of the biggest barriers people with unmanageable debt face. Part of our job is to explain to them that they deserve to live a full life, free from stress. They are more important than their debts. Once people understand that, they can start moving forward.”

— Nancy Snedden, LIT, BDO, St. John’s, NL.

When Wendy first met with Yvette Power at the BDO office, she was distraught. She had spent many sleepless nights worrying about keeping up with her bills. Because of the financial strain, she wasn’t able to afford to do the things that were most important to her, like visiting her daughter and grandkids on PEI.

She cried during her entire initial consultation. In her words, she felt like a failure.

It took Wendy a few consultations before she was able to make a decision regarding her debts, recalls Yvette. We’re used to people taking their time. We had suggested that she file for bankruptcy, given the extent of her debts and her situation in life. We had to make sure that she understood that no one was pointing the finger at her.”

— Yvette Power, BDO, St. John’s, NL.

Once Wendy fully understood the bankruptcy process, she was comfortable with her decision. She was relieved to learn that she could keep her vehicle and that her car loan would be excluded from the bankruptcy proceedings. She was also very thankful that her bankruptcy would be completed within two years and that her monthly payments would be affordable.

Many boomers and seniors in Canada are facing affordability and debt challenges. They often avoid or delay getting help because they feel guilty about their financial challenges.

Wendy also understood that her credit rating would be affected. But she didn’t have any long-term financial plans that would require credit. Her most important goal was to improve her quality of life.

Wendy had gone through a very trying time in her life. She was heartbroken and feeling very vulnerable. The collections calls were really getting to her. Lenders can be quite intimidating and insensitive to what’s going on in peoples’ lives. A Licensed Insolvency Trustee can help you deal with these situations, without any judgement.”

— Nancy Snedden, LIT, BDO, St. John’s, NL.

How has life been since declaring bankruptcy?

In total it took Wendy 21 months to complete the bankruptcy. Nancy was able to negotiate a monthly payment of less than $200 to cover the administration fees and surplus payments related to her file.

Wendy has expressed her gratitude multiple times to the team at the BDO office in St. John’s. Both Nancy and Yvette were touched to see the transformation they saw in her. She is now spending an extended break with her family on P.E.I.

Are you struggling with unmanageable debt? It helps to talk about it with people you can trust. You can book a free consultation online, or learn more about how to manage your personal finances by joining us on Twitter and Facebook.