Category: A Consumer Proposal

Are you struggling with consumer debt? If so, you’re not alone.

According to BNN Bloomberg, the average Canadian household owes $1.76 for $1 of annual disposable income. The same household devotes $0.15 of every disposable dollar to making principal and interest payments on debt, which is a record high.

BNN Bloomberg also noted that when you add together consumer credit, mortgage, and non-mortgage debt, Canadians are carrying $2.28 trillion in credit market debt.

What’s more, beyond just carrying debt, they’re paying the price. The number of insolvencies – bankruptcies and consumer proposals – filed by consumers in 2019 increased from the year before.

While the numbers for the final quarter of 2019 have not been released yet, as of Q3 2019, Canadian insolvency filings were up to 34,708 — up more than 4,000 over Q3 2018. Of that, the number of bankruptcies rose slightly (from 13,549 to 13,757) and the number of consumer proposal filings rose substantially, going from 16,764 to 20,951.

Why are more Canadians going into debt?

According to a survey from Manulife, two in five Canadians believe they will never be debt-free.

There are many reasons Canadians might currently be struggling with debt. Housing prices are continuing to rise, especially in larger cities like Toronto and Vancouver.

While interest rates have stayed the same for the past year, the added spikes in 2017 and 2018 still didn’t help for those carrying debt. Some have also speculated that it’s too easy for Canadians to gain access to credit – and spend more than they can afford to pay back.

For others, job insecurity can be part of it – not enough income to make ends meet. They might be facing job loss, working in a precarious employment situation (like the gig economy) with inconsistent income, or simply not earning enough to afford high housing prices.

Poor credit habits can hurt your finances, too. While paying only the minimum balance on your credit cards can seem like a good idea, it can actually mean more debt in the long-term.

Sometimes the moments leading up to major debt troubles are insidious. What can start as a seemingly harmless action can snowball into a much bigger problem.

What exactly does struggling with debt look like? It could include:

• Being unable to pay all your bills in full and on time each month.
• Making only the minimum payments each month.
• Being unable to make even the minimum payments.
• Having more debt than income.
• Always taking out another loan to pay off your old debts, getting into an unsustainable cycle.
• Relying on credit to pay all your bills because you don’t have enough funds in your bank account.
• Consistently being unable to afford the items you need to achieve a daily quality of life – pay for groceries, afford your rent, and so on.
• Living paycheque to paycheque without knowing how you would afford an emergency.
• And more…

This might vary depending on your exact circumstances, but any of these could be a precursor to bigger problems down the road.

How to deal with debt before major damage is done

The sooner you realize you have a debt issue, the more likely you are to resolve it before major damage is done to your quality of living.

When you file for insolvency, your credit score takes a big hit. While this is sometimes the best option, and it is possible to recover over time, if you tackle your finances early you minimize the need for this type of action.

Some steps you can take to resolve problem debt include:

• Creating a realistic budget and looking for ways to reduce your current expenses, then putting the savings towards paying off your debt.
• Honestly assessing where your money is currently going and eliminating wasteful spending.
• Practicing good financial habits, like always paying your bills on time and in full.
• Not relying on credit. While some use of credit is good for your credit score, you don’t want to be using it because you don’t have the money elsewhere.
• If you have an income problem, looking for ways to earn more – either through asking for a raise, finding a new job, or getting a part-time job.
• Seeking out debt consolidation methods, such as mortgage refinancing.

While filing for insolvency is one option, it’s not the only option – especially if you tackle the problem early.

In 2020, make your resolution to figure out your finances for good. Debt freedom is possible with a little planning. There’s no point feeling bad about the circumstances that got you into debt. Instead, realize you’re not alone and focus on finding the way out.

That’s where we come in. At DebtCare Canada, we will assess your situation and make recommendations to deal with debt. We’ll go over your options and create a realistic plan for success.

Contact us today for a free consultation. Call 1-888-890-0888  or visit www.debtcare.ca.