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.
Don’t Miss
- Want to retire with an extra $1.3M? See how Dave Ramsey’s viral 7-step plan helps millions kill debt and build wealth — and how you can too
- The Canadian economy shrank in Q2 2025 — protect your wallet with these 6 essential money moves (most of which you can complete in just minutes)
- Boomers are out of luck: Robert Kiyosaki warns that the ‘biggest crash in history is coming’ — here’s his strategy to get rich before things get worse
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).
Read more: What is the best credit card in Canada? It might be the RBC® British Airways Visa Infinite, with a $1,176 first-year value. Compare it with over 140 more in 5 seconds
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.
What To Read Next
- Here are 5 expenses that Canadians (almost) always overpay for — and very quickly regret. How many are hurting you?
- Ray Dalio just raised a red flag for Americans who ‘care’ about their money — here’s why Canadians should limit their exposure to U.S. investments
- I’m almost 50 and don’t have enough retirement savings. What should I do? Don’t panic. Here are 6 solid ways you can catch up
- Here are the top 7 habits of ‘quietly wealthy’ Canadians. How many do you follow?
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)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.