20 Warning Signs You Have a Debt Problem & What To Do Next

Debt isn’t necessarily about the amount – it’s about your ability to pay.

Whether it’s the Canadian average or $70,000 or lower, your financial future will be unstable if you can’t afford to pay.

With that in mind, it’s essential to spot the signs before they escalate out of control.

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Below are the twenty warning signs of a debt problem and the solutions.


  1. You’re feeling stressed: Your subconscious will be the first alarm. If you think you have too much debt, the chances are that you probably do and need to do something about it ASAP.
  2. Losing sleep: Does the thought of debt keep you up all night? Are you worried about your financial future? Stress and anxiety will soon turn into insomnia, and your arrears are to blame.
  3. Your outgoings are greater than your income: Sometimes, you will need to spend more than you earn due to unforeseen circumstances and investments. However, people who are debt-free make sure their expenses are significantly lower than their incomings. Otherwise, there is no buffer.
  4. Debt payments are 20% of your net income, and more: Your debt service ratio is what lenders use to decide whether you’re a trustworthy applicant. Typically, they use a 40% TDS as the cutoff point, yet 20% is risky because you may only include minimum payments instead of the total of your debts.
  5. You can’t pay your bills on time: Bills don’t go away. Anybody who can’t pay on time will incur rates of interest that start at 19% and only get higher.
  6. You’re receiving collection calls and letters: When this happens, your debts are now possessed by collection agencies. As well as escalating the issue in the courts, they can take assets from your home, such as your car.
  7. You live off of your overdraft and lines of credit: Even if you don’t have much debt, living off your overdraft and lines of credit means you’re one error from being in the red. And, as you don’t have surplus cash, you won’t be able to reduce your arrears.
  8. You can’t fulfill utility or housing bill deadlines: Missing payment dates hits your credit rating hard, as well as adding to your debt.
  9. You’re transferring balances from one line of credit to another.
  10. You don’t pay your credit card balance[s]: Unless the card is 0% interest, purchases are subject to interest rates. The interest continues to rack up until you pay off the balance in full.
  11. You don’t save any money at the end of the month: Living from paycheck to paycheck prevents you from saving for a rainy day and worst-case scenarios.
  12. Your wages are garnished: Garnishment is a legal court order. It compels your employer to withhold a portion of your salary to pay your creditors. If you have multiple debts, it will restrict your ability to pay them all.
  13. You’ve had subscriptions or utilities cutoff: Cutting off services is the last resort. Companies only do it when they assume they won’t get their money.
  14. You don’t open your bills: This is for fear of how much your debt has grown since you last checked.
  15. You’re not eligible for debt consolidation: Your debt means that a creditor can’t trust your word, making you too much of a risk to consolidate your overdue balances.
  16. You hide debts: Usually because you know you’re in trouble and don’t want to make your family anxious. You’re not the only one – there’s $1bn of outstanding credit card debts in Canada.
  17. You can’t get new credit: Or, you may need to apply for finances with ‘non-traditional’ lenders. Why? It’s because your debt has decimated your credit score to almost zero.
  18. You’re using cash advances on your credit card: You’re desperate for cash to the point where you withdraw it from an ATM using a credit card at a flat-rate 30% apr.
  19. You’re carrying more than one payday loan: Often, when you have so much debt, you have to take out new loans to pay off the old ones. It’s a vicious cycle, and almost impossible to end.
  20. You have no idea how much debt you have: You know a ballpark figure or think you do. In reality, 40% of Canadians will never be debt-free because they don’t understand their credit rating and how balances are structured.


What Should You Do When Your Debt Is High?


You may feel as if there is no way out, but there is always an option.

The first port of call is to contact your creditors to devise a payment plan.

Firstly, they prefer to recoup some money rather than none of it.

Secondly, they buy debts at low prices and don’t need to recover as much of it to make a profit.

Reviewing your lifestyle and making significant changes is an option, too, as is a consolidation loan.

For those who are applicable, you can pay off balances quicker and easier with a lump sum payment.


Consumer Proposal


Sadly, only 12% of Canadians’ wealth is growing faster than their spending, so you could be in a situation where you expert help.

A Consumer Proposal is an excellent option for several reasons.

To begin with, it doesn’t harm your credit rating in the same way as filing for bankruptcy, yet you can still clear unsecured balances.

Also, you will keep all of your assets.

What makes a Consumer Proposal more appealing than anything else, though, is the fact it’s enshrined in law.

The Office of the Superintendent of Bankruptcy recognizes it as a formal agreement, unlike a casual payment plan.

As long as your debts aren’t higher than $250,000, you can use a Licensed Insolvency Trustee (LIT) to thrash out a plan.


Bankruptcy Canada


With our LIT search software, you can locate an experienced and certified LIT in your area in seconds.

Once you have a trustee in your corner, you won’t spend restless nights worrying about bailiffs or losing your home.

Call us now to get the ball rolling and change your life for the better.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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