Hamilton woman's ODSP cut after selling her home to pay off debt

Patricia Atkinson, 58, has lived in the same two-storey house in Hamilton's Keith neighbourhood for 25 years. In this part of the central lower city, neighbours know each other and Atkinson feels at home. When her husband Donald died last year, she knew she wanted to stay — but had a $90,000 home-equity line of credit to contend with first.

Atkinson suffers from epilepsy and severe back problems, and receives Ontario disability support program (ODSP) payments. She knew paying off the loan was unlikely, but without her husband's income, she was also unlikely to even be able to renew it, she said. Don had also been her caregiver, so she needed more help around the house as well. 

That's when her daughter Joan Wilkinson, 33, stepped in, moving in and buying the home from her mom in February for the amount Patricia owed. It seemed like a good solution — until a letter from the Ministry of Children, Community and Social Services announced it was reducing Atkinson's ODSP payments because she "should have sold her house for more money," said Wilkinson, a hairdresser and single mom to a teenager.

The family says Atkinson has been informed that her ODSP payments have been reduced by $233.80 per month, so she will now receive about $600. 

"I didn't really understand it, but I got Joan to talk to the worker," said Atkinson. "What I am getting now doesn't even cover what I need."

While the ministry says it doesn't comment on individual cases, spokesperson Kristen Tedesco told CBC Hamilton that "eligibility for ODSP is based on an applicant's individual circumstances, including his or her financial situation."

She said that, "social assistance eligibility or income support is not impacted if the proceeds from the sale of the home are used to purchase an approved asset that is necessary for the health and welfare of the person or an exempt asset. In these cases people are generally given six months to use the funds for the purpose described above. An individual can also use the proceeds from the sale of an asset to pay off debt. In all cases the asset must be sold for fair market value."

Homes have recently listed in the Keith neighbourhood in the $400,000 range.

Tough to pay down debt for people on ODSP, analyst says

The family's story highlights the challenges in paying down debt and maintaining long-term financial health for people on disability payments, says Hamilton Roundtable for Poverty Reduction senior policy analyst Laura Cattari. She says people on ODSP are restricted to $40,000 of accumulated savings, so can't build up a very big rainy-day fund — even if they get an inheritance or other lump sum. Further, ODSP can revisit a recipient's payments if they sell an asset and don't put the money into certain "protected assets" such as a house or a car.

"You really have to get advice before you sell property," she said. "You have to be careful with what you do with your money [while on ODSP]."

Meanwhile, Cattari says, ODSP payments are not enough to constitute a living income, so debts tend to build up over time with few feasible methods to pay them off. She wrote a policy paper on the issue in January called Beyond Basic Needs: The Financial Cost of Disability. It states that people on disability payments often end up resorting to credit to pay for uncovered expenses, which deepens the cycle of poverty because they are then using part of their monthly payments to service debt.

"This long-term deficit in income impacts their ability to purchase more expensive replacement items like beds, sofas, appliances and housewares, as well as home repairs. Inclusion of a robust disposable income calculation for long-term needs is imperative," she advised policy-makers in the paper.

"While (credit) may meet immediate needs … debt servicing becomes a permanent part of their budgets. This impinges on the already (strained) incomes, deepening the poverty they experience."

Atkinson says she's considering appealing the decision to cut her benefits and has contacted the Hamilton Community Legal Clinic for help. In the meantime, she's thankful she wasn't cut off from her benefits completely, as she says her caseworker initially led her to believe.

"I have to help my daughter with groceries," she said. "I've got to pay her something toward the rent."