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Warning signs of debt problems may be more subtle than you’d expect, and as consumers across Canada cope with more financial obstacles than ever before, it can sometimes be difficult to pinpoint when personal debt doesn’t just mean payments you make, but becomes a real problem.

Read on to better understand how to evaluate your situation, from often overlooked warning signs to common triggers that prompt people to seek debt help and the red flag you should never ignore – and what to do if you think you have a debt problem.

4 Warning Signs of a Debt Problem People Miss 

These four common signs of a looming debt problem are recognizable but often overlooked or downplayed. If you relate to any of these challenges it may be time to take a closer look at your situation and seek debt advice from a Licensed Insolvency Trustee.

Debt Warning Sign: Being Caught in a Borrow-Repay-Borrow Cycle

If you’re habitually using credit to make up the balance between your household expenses and income you’ve already begun to experience a debt problem, and it’s likely to escalate. Are any of these habits you recognize?

  • Constantly relying on credit to cover the difference between costs of living and your income, or leaning on credit cards or overdrafts between paydays – or for unexpected expenses.
    • Take a close look at what’s taking up so much of your budget – debt payments might be costing you more than you can afford.
  • Shuffling money from one credit card or line of credit to make payments on another.
    • Simply keeping your accounts from delinquency doesn’t mean real progress is being made.
  • You’re borrowing from family or friends, or taking payday or other ‘fast cash’ type of loans.
    • Using payday loans often starts a borrowing cycle that is very expensive, and tough to break.
  • Considering a debt consolidation loan.
    • Consolidation loans through a lender can be a helpful way to get a handle on debt, but they are often difficult to qualify for and, if the underlying issues aren’t addressed, many people quickly find themselves carrying too much debt again.

37% of participants in a 2023 BC Consumer Debt Study said “accumulating more debt” was how they knew their debts were becoming a problem. 

Many people trapped in a borrow-repay-borrow cycle eventually find that keeping up with their debt payments and regular bills is unmanageable, or that an unforeseen event or emergency pushes them into a crisis cash-crunch.

  • Is your cashflow stretched so thin with debt payments that you can’t afford savings or an emergency fund? Many people are just a small upset in income or unplanned expense away from a significant financial problem. Relationship breakdown, personal illness or injury, or reduced employment are just a few common problems that can have serious financial impacts.

If you’re making payments on your debt and experience any of the previously described signs, this is a strong indicator it’s time to seek professional support to deal with your debt and break the debt cycle.

What’s the Difference Between Good Debt and Bad Debt? Learn More

Debt Warning Sign: Avoiding Your Finances or Account Balances 

Whether you’re uncertain about what to do or feeling too overwhelmed to put together a plan, procrastinating on facing financial commitments means there is a problem. Does any of this sound familiar?

  • Having unopened bills or creditor correspondence.
    • Guessing on balances or ignoring creditors leaves you exposed to ‘surprise’ legal actions or ramped up collection activity. It’s always best to remain aware of your account balances and activity, even if you can’t pay the debt.
  • Putting off tax returns or other Canada Revenue Agency filings because you know you owe money.
  • Not sharing your financial situation with your spouse or partner.
    • It can be difficult to talk about money problems you may be having, whether as a couple or on your own. It’s often better to have open communication than continue to try to hide what’s happening.
  • Screening phone calls and text messages to avoid creditors.

It can be tough to admit debt has gotten out of hand but it’s always best to assess your situation truthfully and confront the challenge – without doing that the problem is virtually never going to go away. Avoid the temptation of avoiding the problem; facing it head on with the support of a Licensed Insolvency Trustee may be easier than you think.

We understand many people feel embarrassed or ashamed they haven’t been able to manage their debts and money matters the way they wanted to. No matter what, you are entitled to live with dignity and without the overwhelming stress of debt.

9 Things Licensed Insolvency Trustees Want You to Know About Dealing with a Debt Problem

Debt Warning Sign: Paying Only Minimum Monthly Payments 

Keeping your account paid up to date is of course good; but if you’re making only (or slightly more than) the minimum monthly payments on your debt, this is one of the top signs of a debt problem. Making payments in this way isn’t enough to make real progress in having your debt paid off, rather, it keeps you in debt long-term.

  • ‘Minimum payment traps’ can cost you thousands in interest charges and, eventually, added interest can push you over account limits.
  • Even a modest credit card balance can take decades to clear if only minimum payments are made – a $5,000 debt today could mean 18 years of payments with only minimum monthly payments being paid.

60% of people polled in the 2023 BC Consumer Debt Study said “only making minimum payments” was how they knew they had a debt problem, making this the second-most reported sign of a debt problem.

Consider these Tips to Pay Off Credit Cards Faster 

When you make only the minimum monthly payment you’re servicing the interest, keeping your account current and probably maintaining your credit score – but you’re not actually paying off the principal. Eventually those minimum payments can even become more than you can afford thanks to the accumulating interest. Consider the following:

  • How long will it take you to pay off your debt at the current payment rate?
    • Check your credit card statements to easily find this information – by Canadian law the credit card company is required to tell you exactly how long it will take to clear the debt if only minimum payments are made.
  • Can you afford to make a higher payment?
    • Look at your budget to get a better sense of just how much money your debt payments are currently using, and assess whether you could afford more without stretching yourself too thin.

Try Our Free Online Debt Options Calculator

Does Your ‘Rule of 60’ Math Add Up?

Carrying debt long-term is expensive and takes money away from your future self. The ‘Rule of 60’ math is an easy way to ‘test’ your debt-free plan: Divide your total (non-mortgage) debts by 60 – does the number come out to a monthly payment you could afford for the next 60 months?

  • If the outcome from your ‘Rule of 60’ calculation doesn’t look affordable, or you’re doubtful you could consistently pay it to get your debts paid off in 60 months (that’s five years), you’ve got another reason to talk with a Licensed Insolvency Trustee about resources to pay off debt.

For example, if you can afford to repay a portion of your debt, consolidating with a Consumer Proposal can be more efficient – and affordable. 

How Much Debt will a Consumer Proposal Eliminate? Learn More

Number One Debt Warning Sign: Being Debt-Stressed 

There can be calculable signs that debt is becoming a problem, but in the experience of many Licensed Insolvency Trustees, and as supported by multiple survey findings – the number one warning sign of a debt problem for people is overwhelming debt-stress.

Debt-stress can impact personal well-being, relationships, family and even work. If any of these debt-stress symptoms sound familiar to you, please know that you are not alone – and there are solutions:

  • Constantly worrying or thinking about your debt.
  • Being scared or anxious about your financial circumstances and unsure what to do about it.
  • Feeling like your debt situation is out of control, helpless, or hopeless.

Connect with a local Licensed Insolvency Trustee right away to get support. We are Canada’s appointed debt help professionals who can offer you qualified advice about your situation and help you put together a plan of action to deal with your debt and get a financial fresh start. In less than an hour you can have a solution – and relief. 

How Does a Debt Problem Start?

If you are facing a debt problem, please understand there are many events and circumstances out of our control that cause financial strain and can quickly turn into a more serious issue. A debt problem can happen to anyone, at any time. We often work with people who need help resolving debt problems that have been triggered by unanticipated events such as:

  • A reduction in household income due to job impacts (the COVID-19 pandemic for example).
  • Health problems in the household that cause extra costs or a loss of employment hours.
  • Establishing a household and/or maintaining one on a single income after a relationship breakdown.

Despite best laid plans and intentions, unanticipated financial challenges do happen! Many people turn to credit to temporarily bridge the gap between income and expenses, and catching up is often much more difficult than expected.

Talk with a non-judgmental debt help professional at Sands & Associates to learn more about all of your debt options, and how you can get a financial fresh start. 

Where to Turn for Help with Debt? A Licensed Insolvency Trustee

In Canada Licensed Insolvency Trustees are the only professionals endorsed, qualified, and fully empowered by governments to help consumers with debt. We can work with you to assess your situation and evaluate all of your options so you can make a fully informed decision about how to move forward and take back control of your finances.

  • There is no cost to connect with a Licensed Insolvency Trustee and no referral is needed.

Sands & Associates President and Licensed Insolvency Trustee Blair Mantin joined CTV News to share information about ways consumers can get support in managing their debt, and warning signs of a debt problem. Watch the clip here:

You are not alone in solving a debt problem – Sands & Associates’ BC Licensed Insolvency Trustees are here for you. Book a free, confidential consultation with a non-judgmental debt expert.

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