Usually, it’s parents who wonder about their kids’ financial stability as they begin navigating adulthood. But what if you’re 23 and worried about your 50-something parents because they’re deep in debt?
You may be concerned if your parents, in their early 50s, had borrowed more than $100,000 in the past two years. This especially holds true if their expenses exceed their monthly income. When monthly earnings are eaten up by mortgage, loan payments and ongoing bills — you need to borrow more to pay existing debts and stay afloat you’re in trouble.
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If they’re prepared to start addressing it, it’s crucial for your parents to shed their debt ahead of retirement, which may only be about a decade away. Getting them out of debt as quickly as possible means they can build a bigger retirement fund, especially if they have, say, just $400,000 saved for their later years. Here’s how to approach the situation.
Make sure you’re in the clear first
If your parents have debt, some of it may have been incurred to help you. If so, it’s natural to want to help your parents pay it off.
However, before stepping in, you need to make sure your own finances are under control and that you can afford to help them without jeopardizing your future. Help doesn’t just come in the form of money: It can also come from offering time and support.
One of the first things you should do is check your credit report to see if any of your parents’ debts are in your name — this would be the case if you cosigned a loan for them. If your name is attached to a debt, you could be on the hook for making payments if your parents fall behind.
You should also encourage your parents to check their own credit reports to get a sense of where they stand. If you see that your parents are delinquent on any of their outstanding loans, a serious intervention may be necessary — one that perhaps involves you moving back in with them temporarily and contributing to household expenses. Once you’ve helped your parents get caught up on their payments, they can review different ways to get ahead of that debt.
Read more: Are you drowning in debt? Here are 3 simple strategies to help crush your balance to $0 in no time
Explore solutions for tackling debt
Canadians aged 45 to 54 carry an average mortgage debt of $434,089, according to data from Loans Canada (1). Additionally, the same study cites the average non-mortgage debt — credit cards, lines of credit and vehicle loans, for example — is approximately $84,720 for this age group. So if your parents are carrying debt, they’re not alone.
Several different options are available to your parents so they can start paying off debt. One is the snowball method, which has them paying off their debts in order of smallest balance to largest. If your parents have some small credit card balances, for example, they’d pay those off before tackling larger debts like their personal loans and mortgage.
With the avalanche method, meanwhile, you tackle debts in order of highest interest rate to lowest. This usually means paying off credit card debt first. From there, they may have a higher interest rate on their personal loan than their mortgage, in which case that would go next.
Consolidating debt can sometimes make it easier to get ahead, too. But in this situation, taking out a new loan to pay off the others may not be the best solution. If the bulk of your parents’ debt is in a personal loan and mortgage, they may not get a much better rate by rolling all of that into a new loan today. That’s because borrowing rates are high across the board, despite recent and ongoing interest rate cuts.
A better bet is to review your parents’ budget and help them find ways to trim expenses so they can make extra payments on their existing loans. You could also give your parents tips on how to join the gig economy for some extra cash.
Encourage your parents to leave their retirement savings alone
It can be very tempting to cash out their Registered Retirement Savings Plan (RRSP) to pay off debt. But that’s not something your parents should do.
If they have $400,000 in an RRSP, that’s a nice amount of money, but it’s also a sum they might easily need during a decades-long retirement. They’re better off trying to boost their income and reduce expenses by downsizing rather than raiding their long-term savings and potentially ending up with no money to support themselves in retirement other than Canada Pension (CPP) or Old Age Security (OAS).
Also, any amount your parents withdraw from an RRSP is considered taxable income. This means whatever amount they withdraw will be added to their annual income — potentially pushing them into a higher tax bracket and more taxes owed at year-end.
Don’t discount bankruptcy, but don’t fall back on it, either
When debts reach the point of becoming unmanageable, bankruptcy can be an option. However it should only be used as a last resort: Bankruptcy can be expensive, destroy credit scores and make borrowing money hard for many years after.
But sometimes it’s the only alternative available to you. In Canada, there are two ways to rectify unsecured debt under the Bankruptcy and Insolvency Act: a consumer proposal or personal bankruptcy. Qualifying for a Consumer Proposal means you must meet federal insolvency criteria. This is what your parents need to be eligible:
- Their unsecured debts — excluding a mortgage on your principal residence — must be up to $500,000 for joint filings, or between $1,000 and $250,000 for a single individual.
- They must, by definition, be insolvent, meaning they’re unable to pay your debts as they become due.
- They must have regular and sufficient income to make the monthly payments proposed under the consumer proposal.
Statistics Canada puts the median annual Canadian income at just over $74,200 for 2025 (2). If your parents earn $8,000 a month, or about $96,000 a year, they fall well above the median or average earnings for most Canadians. While consumer proposals aren’t based on income thresholds, an assessment could likely show they have enough disposable income to pay off the debt.
The alternative is personal pankruptcy. If your parents want to keep their assets or don’t meet candidacy for a consumer proposal, this is the main option available to them, but there can be negative consequences. Like a consumer proposal, personal bankruptcy stays on credit reports for up to seven years after discharge with TransUnion, and six years with Equifax.
Discharges typically happen after nine months without surplus income, or 21 months with surplus income. Taking the maximum timeline into account, personal bankruptcy could take almost nine years from application to completion.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Loans Canada (1); Statistics Canada (2)
This article originally appeared on Money.ca under the title: They’re in their 50s and $100K in debt — I’m afraid my parents are headed for bankruptcy. How can I help?
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.