Debt doesn't discriminate. It doesn't care how old you are, how hard you've worked, or how carefully you've tried to manage your money over the years. And for a growing number of Canadian seniors, it’s become a reality in retirement.
The reasons for carrying debt into our senior years are as different as the people it impacts. Rising rents. Fixed incomes that don't stretch as far as they used to. A medical expense here, a home repair there. Sometimes it's the slow accumulation of everyday shortfalls, month after month, where credit quietly fills the gap between what comes in and what needs to go out. Whatever the cause, one thing is clear: carrying debt into your later years comes with its own unique set of challenges and solutions.
In a recent conversation on the Moolala: Money Made Simple podcast, host and Credit Canada CEO Bruce Sellery spoke with Joshua Harris, Licensed Insolvency Trustee (LIT) and CEO at Harris and Partners, to talk about what debt looks like for Canadian seniors, what options are available, and why getting help is never something to be ashamed of. Whether you're navigating this yourself or trying to help someone you love find a way forward, these insights can help seniors manage debt.
Why Debt Hits Differently in Retirement
The financial pressures seniors face are different from those of any other age group, and that distinction matters when it comes to finding the right solution.
When you're in your thirties or forties and carrying debt, there's usually more time to deal with it and pay it off. You have more years to earn income, opportunities to change jobs, or adjust your spending, which can make it easier to recover financially over time. But for seniors, that timeline looks very different.
"There's very little earning power at certain stages in life, depending on your health and your age overall," says Joshua. Add to that the reality that many seniors are living entirely on government benefits, such as the Canada Pension Plan (CPP), Old Age Security (OAS), and/or the Guaranteed Income Supplement (GIS), and the math can become very tight.
Joshua sees it regularly. "The rent is still $2,000 a month for a one-bedroom,” and clients tell him, “I can't afford groceries because I only get $2,200 a month from the government."
That gap between a fixed income and the basic cost of living is where debt can begin to build. Anyone who has lived on a reduced or fixed income—whether due to retirement, disability, or a temporary change in employment—knows how quickly that gap can grow. And once it does, finding a way forward isn’t always easy, especially when options like increasing income or changing careers might no longer be realistic.
There’s also the issue of what Joshua calls “accidental wealth.” Some seniors own property that has grown significantly in value over the decades, but that equity can be difficult to access while still living in the home. On paper, their finances look stable, but in practice, they may still be carrying consumer debt without a clear repayment strategy.
It’s important to recognize that while this can feel limiting, it doesn’t necessarily mean there aren’t options. In some cases, seniors may want to explore whether borrowing against home equity or speaking with a mortgage broker about refinancing could help consolidate or manage their debt. In certain situations, a reverse mortgage can also be considered. While it’s not suitable for everyone, it can provide a way to stay in the home while accessing equity to address financial pressures.
These aren’t one-size-fits-all solutions, and they’re not appropriate in every circumstance. However, they are part of a broader range of possibilities that some homeowners may not realize exist.
It’s also worth noting that not all seniors are in the same financial position. While many are managing on fixed incomes like CPP, OAS, or GIS, others may have higher ongoing income or significant assets but still feel unsure about how to structure their finances effectively in retirement.
Some people may feel stuck between the desire to preserve a family home and the reality of keeping up with monthly payments that are becoming harder to manage.
It’s a complicated position to be in, and it often requires a different kind of conversation than the one most people are used to having about money.
The Ageism Factor
There's another layer to this dilemma that doesn't get talked about enough: ageism in the job market.
For seniors who might consider returning to work or picking up part-time employment to supplement a fixed income, the landscape has shifted. Many jobs now require a level of digital skills or tech savviness that takes time to learn, and not every employer is willing to invest in that training. Even roles that were once considered senior-friendly, like the Walmart greeter, have all but disappeared.
It's a quiet form of discrimination with real financial consequences for older adults.
What Are the Options? A Simple Breakdown
There is a range of options available to help manage debt, depending on your financial situation and goals. These can include solutions like a debt consolidation loan, a Debt Consolidation Program (DCP), or, if you’re a homeowner, speaking with a mortgage broker about ways to use home equity. In some cases, more structured legal options, like a consumer proposal or bankruptcy, can also be explored. Understanding the full range of possibilities can help you choose the approach that best fits your circumstances.
Debt Consolidation Loan
A debt consolidation loan is typically offered by banks, credit unions, or other financial institutions. It combines multiple debts, such as credit cards and personal loans, into a single loan with a single monthly payment and a set interest rate. For some individuals, this can make debt easier to manage and reduce the overall interest paid compared to higher-interest credit options.
However, approval is generally based on a person’s credit score, income stability, and overall debt level. This means it may not be accessible to individuals already experiencing financial strain or who have limited income and/or a low credit score. While a debt consolidation loan can simplify payments, it doesn’t reduce the total amount owed, and repayment terms can extend over a longer period, depending on the loan terms.
Debt Consolidation Program (DCP)
A Debt Consolidation Program (DCP) is offered through a non-profit credit counselling agency, like Credit Canada. It’s an arrangement where a certified Credit Counsellor works with your creditors to combine eligible unsecured debts into one manageable monthly payment. In many cases, interest charges are significantly reduced or stopped, depending on the creditor.
Unlike a debt consolidation loan, a DCP is not new credit. Instead, it’s a structured repayment plan designed to help individuals regain control of their finances with support from a certified Credit Counsellor. The program is tailored to your budget and provides a clear timeline for becoming debt-free. It can also help reduce stress by replacing multiple payments with a single monthly payment.
Speaking with a Mortgage Broker or Using Home Equity
For homeowners, another potential option is speaking with a mortgage broker to see if home equity could be used to help manage debt. Depending on the amount of equity available, refinancing or consolidating debt into a mortgage may lower monthly payments and simplify overall debt obligations.
In certain situations, a reverse mortgage can be an option for homeowners who have built up substantial equity but have limited income. While it isn’t suitable for everyone, it can provide a way to access home equity while continuing to live in the home.
Because these approaches are closely tied to individual financial circumstances, including income, equity, and long-term plans, it’s important to take time to understand how each option may impact both current needs and future financial stability.
If debt has reached a point where earlier-stage solutions, such as a debt consolidation loan or a DCP, are no longer suitable, there are still additional structured options available. These include consumer proposals and bankruptcy, which are formal insolvency options administered through an LIT and regulated by the Office of the Superintendent of Bankruptcy (OSB). Both involve different approaches to resolving debt and can be worth reviewing as part of the overall decision-making process.
Consumer Proposals
A consumer proposal may be a good fit for seniors who have some ability to repay a portion of their debt over time, whether through a part-time income, private pension, or other financial resources.
“In a proposal, you'll have a longer period of time to pay,” Joshua explains. “It'll stop interest, it'll make things more comfortable and digestible.”
A consumer proposal can help people keep their assets, including their home, depending on their financial situation. An LIT will first review a person’s finances to determine whether they qualify as insolvent under the Bankruptcy and Insolvency Act (BIA). If a consumer proposal is the right fit and creditors agree to it, it can stop collection activity while allowing you to keep ownership of your assets.
For many seniors, that kind of stability can make a real difference. A consumer proposal will impact your credit, but for many people in retirement, rebuilding credit isn’t a main concern, especially if they’re not planning to take on a new loan or mortgage in the future.
Bankruptcy
For seniors with very limited income and no means to support a repayment plan, like a DCP or consumer proposal, bankruptcy can be a reasonable option to consider. As Joshua explains, “If you’re in that lower income bracket, with little or no income and no assets, you’re going to want to resolve things as quickly and affordably as possible.”
Many seniors also have important protections in place. For example, government benefits like CPP and OAS are generally protected from garnishment, and most registered retirement savings are exempt from seizure, depending on the province or territory. However, it’s important to note that any contributions made to registered savings plans within the 12 months prior to filing for bankruptcy may not be protected and can be subject to review by an LIT.
Because of these rules, some people may hesitate to file for bankruptcy, even when it could be the most appropriate option. If financial pressure or collection activity is becoming difficult to manage, speaking with a professional like a certified Credit Counsellor or LIT can help you understand whether bankruptcy or another alternative is your best option.
What Creditors Can (and Cannot) Touch
One of the most important, and often misunderstood, things seniors need to know is what creditors are actually able to access, whether through legal action or through an insolvency.
Government Pensions Are Protected
As previously mentioned, income from government benefits like CPP and OAS is generally protected from garnishment. This means creditors can’t access these payments directly.
"Even though a creditor could sue you and seize your bank account, they can't go to the CRA and say, 'Give me their CPP every month,’" Joshua explains.
For seniors whose income comes entirely from government pensions, insolvency may not even be necessary because these funds are protected. However, there are situations where a person’s bank account could be frozen through legal action, which could affect access to government benefits deposited into that account.
It’s also important to understand that the rules are different when the creditor is the Canada Revenue Agency (CRA). If someone owes unpaid income tax, the CRA may be able to redirect certain government benefit payments toward that debt. In some cases, filing a consumer proposal or bankruptcy can stop this collection activity, since the CRA does not receive preferential treatment in an insolvency.
This is one of the reasons why it’s important to speak with a professional before deciding how to best manage your debt.
Registered Savings vs. TFSAs
Different types of registered savings accounts are treated differently when it comes to creditor protection and insolvency.
Registered retirement products, including Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), and Life Income Funds (LIFs), are generally protected from creditors in many situations. However, the rules vary by province or territory. For example, in Ontario, RRSP contributions made within the 12 months prior to filing for bankruptcy are not protected and could be seized by the trustee. On the other hand, in Alberta, even RRSP contributions made shortly before filing are protected.
Other registered accounts may not receive the same level of protection. Tax-Free Savings Accounts (TFSAs), for example, are not exempt from seizure and could be accessed by creditors through legal action or during a bankruptcy. Registered Education Savings Plans (RESPs) and certain Registered Disability Savings Plan (RDSP) contributions may also be vulnerable in some situations, depending on the province and the type of legal proceeding involved.
Because these rules can be complex and vary based on individual circumstances, it’s important to speak with a professional before making any financial decisions. Understanding how legal action or insolvency could affect your assets can make a big difference when assessing your options.
Financial Challenges in Retirement Are More Common Than Many People Realize
Carrying debt into retirement can come with a sense of frustration, regret, or even embarrassment—a feeling that, after a lifetime of work, you should have figured this out by now. As Joshua often hears from seniors, “I made it to 75. Why do I have to do this now?”
But financial challenges later in life are more common than most people realize. Rising costs, longer life expectancies, and changes in income can all contribute to debt, even after decades of careful planning.
As Joshua puts it, "A lot of people are going through the same thing. It's important that they understand they're not alone."
The fear of losing a home, the worry about what happens to a spouse or children, and the anxiety of picking up the phone and starting that conversation are all very real concerns. These feelings are completely understandable, but they can also prevent people from getting the help they need and deserve.
It’s important to understand that reaching out for help isn’t about looking back or feeling regret. It’s about understanding what options are available now and making informed decisions moving forward.
Will I Lose My Home?
One of the biggest fears for seniors dealing with debt is the idea that they could lose their home. It’s a concern Joshua hears often, especially from people who are already feeling overwhelmed or unsure where to turn.
In reality, there are several ways to approach debt depending on the situation, and losing a home is not the default outcome. In many cases, the first step is to explore lower-intervention options, such as working with a non-profit credit counselling agency, setting up a DCP, or speaking with a mortgage broker about refinancing or using home equity.
For some homeowners with significant equity, accessing that equity or restructuring a mortgage can help them stay in the home while managing unsecured debt. These options depend on income, equity, and long-term affordability, and while they’re not suitable for everyone, they can be an important part of the overall picture.
When those solutions aren’t available or aren’t enough to resolve the situation, more structured approaches such as a consumer proposal or bankruptcy may be considered. Even then, the focus is typically on finding a workable path forward that balances debt resolution with protecting key assets wherever possible.
It’s important to note that there isn’t a single outcome. There are multiple pathways, and the right one depends on each person’s financial reality—not just the debt itself, but their income, housing situation, and long-term goals.
Joshua also reminds us that there are solutions for everyone and that "not everything ends with a bankruptcy."
Whether the solution is a structured repayment program like a DCP, a formal insolvency option, or simply a clearer plan, getting accurate information can provide a sense of relief and direction.
What Happens to Debt When You Pass Away?
One of the most common concerns is whether or not debt is inherited. It’s also a question Joshua hears often across all age groups, and the answer usually brings a sense of relief.
“Debt does not transfer upon death,” he explains.
Debt does not get transferred from one generation to the next. Instead, any outstanding debts are handled through the person’s estate after they pass away.
Creditors can make a claim against the estate to recover what’s owed. If there are enough assets, those debts are paid from the estate. If there isn’t enough money or property to cover the balance, the remaining debt is typically written off.
There is one important exception. If a debt is joint or someone has co-signed it, that person becomes fully responsible for the remaining balance, regardless of their relationship to the deceased.
In some cases, the person who passed away might have had insurance coverage to pay off the balance upon death. Because every situation is different, it’s important for surviving family members to get professional advice so they understand exactly what, if anything, they are responsible for.
One More Important Step
While this isn’t strictly about debt, Joshua highlights the importance of having your affairs in order, including setting up a power of attorney for financial matters.
Health changes and cognitive decline can happen gradually and aren’t always predictable. When they do occur, managing financial responsibilities can become much more complicated, which is why having a trusted person legally authorized to step in can be so important.
A power of attorney allows someone you choose to manage your financial affairs if you’re no longer able to do so yourself. Putting this arrangement in place early can help prevent complications later and ensure your finances are handled in line with your wishes.
Getting Help Starts With a Conversation
Whether you're a senior carrying debt or a family member trying to help someone you love find a way forward, it’s important to know that support is available.
Speaking with a certified Credit Counsellor is free, confidential, and comes with no obligation. It’s an opportunity to ask questions, understand your options, and take the first step toward a plan that works for your situation.
To explore your options at your own pace, tools like Mariposa, Credit Canada’s AI-powered debt management agent, can help. It’s available 24/7 and can answer general questions about debt and your different options.
When you’ve spent a lifetime working and planning, you deserve clear, honest guidance about what comes next and the reassurance that there are paths forward.
Call us at 1 (800) 267-2272 to get started.
Frequently Asked Questions
1. Can seniors get out of debt in retirement?
Yes. Seniors have several options depending on their financial situation, including debt consolidation loans, a DCP, mortgage refinancing, consumer proposals, and bankruptcy. The right solution depends on income, assets, and overall financial goals, but it’s important to know that there are solutions in every situation.
2. Can creditors take my CPP or OAS payments?
In general, government benefits like CPP and OAS are protected from garnishment by most unsecured creditors. However, the CRA can take or redirect these payments for unpaid taxes without needing a court order. If a creditor takes legal action and a bank account receiving these deposits is frozen, access to those funds can also be affected. It’s also important to note that once deposited, funds may be subject to a bank’s “right of offset,” meaning the financial institution may freeze or apply funds toward debts owed to that same institution (such as a credit card or loan). Because of this, it may be safer to bank with an institution where you do not owe money.
3. Are my retirement savings protected from creditors?
In most cases, registered retirement savings plans such as RRSPs, RRIFs, and LIFs are protected from creditors, although rules can vary by province. In some situations, recent contributions (often within 12 months before filing) may not be protected, depending on the province and the type of proceeding. TFSAs are not protected from creditors and are not exempt in bankruptcy. In a bankruptcy, TFSA funds are typically seized by the trustee and used for the benefit of creditors.
4. Will my family inherit my debt when I pass away?
In most cases, no. Debt does not transfer to family members. Instead, any outstanding debts are handled by the estate. If there are no assets in the estate, the debt is typically written off. Family members are only responsible if they have co-signed or jointly held the debt. Regardless, it’s always a good idea to seek professional advice after someone has passed away to ensure all aspects have been discussed and understood.
5. When should I speak to a professional about debt?
The earlier, the better. If you’re feeling overwhelmed, unsure of your options, or struggling to keep up with payments, speaking with a certified Credit Counsellor or Licensed Insolvency Trustee (LIT) can help you understand your situation and explore solutions. These consultations are typically free, confidential, and come with no obligation.
