My parents owe $70K, have almost no assets and plan to ignore the debt until they die. Will I be on the hook to pay it all off?

June’s parents are struggling financially, and she’s not sure how to help. Both are in their 80s and living on Old Age Security (OAS) and Canada Pension (CPP) benefits. They don’t have retirement savings and their assets are slim. Their car is more than 20 years old and they live in a dated park model home on rented land.

The bigger problem? They owe nearly $70,000 in credit card debt and medical debt. They’ve considered bankruptcy but are leaning toward ignoring the debt and creditor calls, hoping it all goes away when they die.

June is worried. She is unsure of the legal risks, fears debt collectors could sue her parents and wonders if she might inherit their debt. While this is a hypothetical situation, many Canadians with ageing parents may be in a similar situation. While their feelings of anxiety may be warranted, there are certain legal safeguards in place to protect the children of debt-ridden parents.

Is it illegal to ignore debt collectors?

Ignoring debt collectors isn’t illegal in Canada, but it can carry serious consequences. Unless there’s fraud, you won’t face jail time for unpaid debts, but debt collectors have legal avenues they can take to recover money owed (1). These approaches include taking you to court where a judge could allow the creditors to garnish your wages (2), or put a lien on any property you own (3).

However, collectors are prohibited from harassing you, using intimidation or abusive language and they can’t contact you outside of business hours. If you’re experiencing any of these issues with a debt collector, visit the Financial Consumer Agency of Canada’s dealing with a debt collector page (4) to learn more about your rights and obligations.

For people like June’s parents, most government benefits are protected against garnishment. CPP, OAS, Employment Insurance (EI) and Guaranteed Income Supplement (GIS) payments are typically exempt from debt collectors (5). The exceptions are delinquent taxes (6), court-ordered child or spousal support (7) and some student loans, which can still be accessible to collectors (8). Provincial and territorial laws might have specific language on exemptions or benefits, so be clear on what the rules are where you live (9).

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Can I inherit my parents’ debt?

June also worries about inheriting her parents’ bills. The good news: You can only inherit debt if you cosigned for a loan or credit card (10).

That said, debts are paid out of the estate before it’s distributed to heirs. Estate taxes and funeral costs are typically paid first, with mortgages and car loans next and the sale of these assets to recoup the money owed as a common next step (11). And finally, any outstanding taxes owed to the Canada Revenue Agency (CRA) must be paid before other unsecured debts, including credit cards and personal loans (12).

Don’t pass on financial grief

As June’s parents struggle with unsecured debt, the safest option may be for them to file for bankruptcy. Essential items such as necessary clothing, household goods, one vehicle, tools of the trade, RRSPs — minus contributions made in the past 12 months — and some pension income are considered exemptions, and vary by province (13).

Once her parents’ debt is discharged, June can help them focus on building a budget that works with their income in hopes of making their final years more financially secure and less stressful.

If you or your loved ones are in a similar situation, consult a Licensed Insolvency Trustee (LIT) to fully understand the bankruptcy process and the exemptions specific to your province or territory.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Debt Canada (1); Hoyes Michalos (2, 11); Debt Solutions (3); Government of Canada (4, 5, 6, 7); Bankruptcy Canada (8); MNP Debt (9); David Sklar (10); Consolidated Credit (12); Grant Thornton (13)