Adult Children and Parental Debt

By Bonnie Krisher

The end of the email read “Thanks for your call and making me not feel bad for what we have to do.” This is a direct quote from a gentleman in his mid-fifties needing help with his debt.  During our initial phone conversation, he told me that his children were grown and did not know that he and his wife were in financial trouble.  He didn’t want to worry them, and felt ashamed.  As a Debt Arbitrator, I can safely say that this is one of many conversations that I have had over the past seven years with individual’s middle aged and older.  This secrecy has been difficult to witness.  Older generations tend to consider debt as a reflection of them selves and personalize it, while more recent generations consider debt a problem in and of itself.

Fortunately, in the past couple of years we have noticed an increase in children who are calling in and asking for help on their parents behalf.  Perhaps this is a result of children paying more attention to what is going on with their parents, or, perhaps, parents are increasingly confiding in their children.  Either way this recent intermingling of two financially distinct generations is changing how people face hardship and debt.  Through advocacy, children are able to be more proactive and have a greater impact on the health and happiness of their parents.  Particularly, how their parents health and happiness is affected by financial stress.

Studies have shown that stress is directly linked to health issues.  In fact, the stress associated with debt has been shown to be a significant factor in many areas of life including divorce, depression, suicide, criminal behaviour, and disease.  After several recent studies, the Institute of Science, Technology and Public Policy released this statement, “Ninety percent of disease is caused or complicated by stress. Cost-effective, scientifically proven solutions exist that can alleviate this enormous strain on our country’s human and financial resources.”

Furthermore, “Some of the leading conditions that cause the greatest health burden in this country — heart disease, stroke, cancer, and severe depression — are linked to stress, and to a large extent are preventable. Research has found that cardiac patients who learn to manage stress reduce their risk of having another heart attack or heart problem by 74%, which suggests that stress management is more effective than even exercise in preventing heart disease (The Congressional Caucus on “Stress Prevention: Its Impact on Health and Medical Savings“, Institute of Science, Technology and Public Policy).”

As a debt arbitrator, I would like to make these recommendations.  Parents, recognize how your debt may be causing you stress and/or hardship, and reach out for help.  Your children will welcome the opportunity to work with you to overcome these obstacles.  They are young, very resourceful, and are likely to be much less judgmental than you imagine.  Overcoming a hardship as a family can often draw you closer together.  Your children want to give back to you, and, from my experience, want to help.  The vast majority of Canada is in debt with the average Canadian carrying $25,709.00 in debt.  It is an issue in and of itself.  Creditors are increasingly being held accountable for how they are causing consumers to be entrapped in an increasing cycle of debt.  This is evident in the new legislative changes that have clamped down on how creditors are doing business.  For instance, creditors are now required to obtain expressed consent for credit limit increases, to lower interest costs by mandating allocations of payments in favour of the consumer, and are prohibited from charging over-the-limit fees solely arising from holds placed by merchants (for a full list of regulations visit www.fin.gc.ca).

Children, pay attention to your parents financial situation and ask them questions.  If you sense that they are under stress then let them know that you want to help.  There is nothing more debilitating than feeling alone and isolated.  Reassure them that this can happen to anyone (and believe me, I have represented all demographics).  Finally, do your homework.  I will start you off with a few tips:

1. Consider the options, there are typically four:  debt settlement/arbitration, credit counselling, debt consolidation, and bankruptcy/proposals.
2. Call anyone else that may relate, such as a mortgage broker, financial planner, accountant, lawyer etc., as these people can be useful.  For example, if one of your parents has debt in their name only, and the other parent has their name on the assets (i.e. the house), and the law considers them separate entities, then one cannot be held accountable for the other.
3. Do not give any information to the banks until your parents know how they plan to proceed.  This information is usually documented and can be used against them later on.
4. Research the legislation.  It is typically easy to read and can even be found on line (verify the source of course).  There is the Debt Collections Act, and the Credit Reporting Act, to name a couple).
5. Check out the Statute of limitations for debt collection in your province.  Did you know that in some provinces that if a creditor does not take a debt to court within 2 years, they can NEVER sue that person?  (this is not legal advice of course).  This is important if your parents are already delinquent and it is in collections.
6. Make a list of the pros and cons for each of the four debt management options that I mentioned above.  Remember, that it must make sense.  If the company tells you that your parents are going to pay their debt in full, along with their fee, and end up with a damaged credit report, oh and they are non-profit because the creditors pay them, then perhaps this is not the best option.  Ask about how their fee is paid, what happens to your parent’s credit report, whether they share private financial information with the creditors, and what the consequences are if your parents decide to back out later on.  Finally, check the company’s credibility and read the small print in their contracts.
7. Call K&G Debt and Credit Professionals if you have any questions.  Trust me; we are a pillar of information.

The stress of debt can be inhumane, but families have a chance to use their humanity to overcome it.

Bonnie Krisher, CDA
K&G Debt and Credit Professionals
Ph: (250) 871-6000