Top 10 Warnings Signs of a Debt Problem

(or may become a debt problem)

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Top 10 Warning Signs of a Debt Problem
(or may become a debt problem)

Having debt is normal. In fact, over 70% of Canadians have some amount of debt.

If debt is so common, when does a person have a manageable level of debt and when does having debt become a problem?

Being able to identify that there may be a debt problem is not always clear cut. Everyone’s financial situation is different. What may be manageable debt for one person could be a serious problem for another. So, how do you know that you have a debt problem or are at risk of having debt problem (in the not-too-distant future)?

TOP 10
of a Debt Problem

(or may become a debt problem)

  1. You have little to no savings.
  2. You only make the minimum payments on your credit card debt(s).
  3. Your minimum payments keep getting larger (as you get deeper and deeper into debt).
  4. You regularly miss or make late bill payments.
  5. You get collection calls from debt collectors or past due notices.
  6. You borrow from one creditor to pay another creditor.
  7. Your bank account is overdrawn and/or bounce payments regularly.
  8. Being denied for a consolidation loan by your financial institution.
  9. You do not have a clear idea of how much total debt you owe to your creditors
  10. Your debt situation is affecting your relationships with family and friends, increasing your stress levels, and you may even be having difficulty sleeping.

If one or more of the warning signs apply to you, it may be an indication that you have (or will have) a debt problem. Sometimes it is difficult to admit or acknowledge a debt problem and it is easier to ignore it with the hope that things will work out. Unfortunately, debt problems do not go away by themselves.

What To Do If You Have a Debt Problem

An Action Plan to Become Debt-Free

There are many options to deal with debt. Here is a brief overview of a few:

  1. Figure out how much you actually owe to creditors (see # 9 on warning signs). Make a list of who you owe money to and how much you owe each creditor.
  2. Create a (monthly) financial budget.

    Make a budget of how much money you have coming in each month and then make a list of all the things that you spend money on. This may require you to track your expenses by keeping receipts or a log of what you purchase.

    Creating a financial budget will provide you with a snapshot of how much money is coming in, where your money is being spent and determining what, if anything, is unnecessary or items you can do without.

    Often this step is enough to get you on track if your debt is not too high.
  3. If your debts are not too high and can be manageable, you may want to consider:
    1. Getting a second job or side hustle to earn some extra income to pay off your debt. Some common jobs we have seen people do are Uber driving, a side business that they run on weekends (i.e. baking, photography, cutting grass, etc.) and even a part-time job. Use the proceeds to directly pay off debt.
    2. Sell items you no longer need or use. Use these proceeds to directly pay off debt.

What Options Do I Have If My Debt Level Is High?

The steps listed above are fine if your debt amount is not too high and can be easily managed. What happens if your debts are high and your ability to repay your creditors is limited? For example, your credit card statement indicates that it will take you 37 years to pay off your credit card balance at your current rate. Another example: after paying for basic necessities such as rent, groceries and clothing you do not have much left over to repay your monthly debt payments.

This is when it may be time to get some professional help and consider formal debt relief options.

One option is to consider the assistance of a non-profit credit counsellor. Under this option, you repay the entire debt owed over a period of 5 years and get some interest relief.

A second option is filing a consumer proposal in which you make an offer to repay your creditors, often a fraction of the total amount. Common proposal offers are 25% to 30% of the total debt. However, it is important to know that each situation is unique and hence, so is the consumer proposal. For more information on a consumer proposal, click here.

The final option that you can consider is filing bankruptcy. If you do not have sufficient income to cover your reasonable living expenses and a monthly consumer proposal payment, then a bankruptcy could be the most effective solution. A bankruptcy should be considered a last resort, however, in some circumstances it could be the right solution to release you from your debt and give you a fresh financial start. For more information on a bankruptcy, click here.

Doing nothing is not a solution because your debts will not disappear and will only get larger. Most of the people that we have helped comment that they wished that they had contacted us sooner. You would be surprised at how much stress is lifted by just speaking with one of our debt relief experts and learning about your debt relief options.

The process starts with contacting us by email, phone or completing the submission form just below.  Contact us for a free no obligation consultation.

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With Chande, you can book a free consultation at one of our locations across the Greater Toronto Area, Hamilton and Southern Ontario.

Finding an office that’s closest to you is as easy as clicking the link below.


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