Debt Load



Debt Load – Can’t balance the budget

In 2015, Statistics Canada released figures on Canadian household debt:  For every dollar Canadians earn, they are carrying $1.64 in debt.

For some, carrying this much debt is crippling and impacts a family’s ability to manage their monthly finances and reach financial goals.

If you completed Step One and Step Two and found that you cannot balance against your income due to your monthly debt payments, then it’s time to focus on dealing with your debt.  Getting your debt under control so that you can realize your financial goals and balance your budget, is important for a healthy financial future.

The first step is to understand how much you owe and the time frame it will take you to pay it off when only making the minimum payment.  Your monthly statements should give you that information, here are some examples:

Debt Balance Monthly Payment Number of years it will take to pay off Interest Rate


Student Loan $15,000 $179.62 10 years 7.7%
Visa $10,000 $400.00 14 years and 1 month 19.5%
Retail Store Card $2,000 $80.00 11 years and 9 months 28.5%
Line of Credit $5,000 $200.00 2 years and 8 months 17.75%


What are your options in tackling your debts?

  1. Paying off the higher interest debt first: making minimum payments on every debt and but making larger payments to the higher interest debt first and paying off your debt one by one. If we use the example above, the highest interest is the retail store card.  If you can come up with an additional $100 per month to put on that debt, it will be paid off in 1 year and 2 months.  After that debt is paid off, then you can take that $180 per month and put it as an additional payment on the next highest interest rate debt and so on.
  2. Obtaining a consolidation loan from your bank to pay off your total debt within, say, a five year term. With the debts above, assuming you have good credit and are able to obtain a consolidation loan, the loan and cost of borrowing (5.5%) over a 5 year terms would be $36,674.22 with a monthly payment of $611.24.
  3. For home owners, it may be an option to borrow an additional amount when your mortgage comes up for renewal and roll your unsecured debts into your mortgage.
  4. For those who cannot get a consolidation loan and cannot roll their unsecured debt into a secured facility, such as a mortgage or secured line of credit, then it may be time to consider other alternatives in dealing with your debt. A Licensed Insolvency Trustee, such as myself, can provide a free consultation to discuss your options, which include:
  • Consumer Proposal
  • Bankruptcy

Consumer Proposal

A consumer proposal is one of the most effective ways to get out of debt.  This option allows you to make a legal agreement with your creditors, including income tax and student loans (with restrictions), which stops interest from accruing.  A consumer proposal is a legal way to settle the amount that is owed by paying only a portion of your debt.  Typically, a consumer proposal allows you to replay only 30% of your unsecured debt, interest free, over a maximum period of five years.


When a consumer proposal is not possible, bankruptcy is a legal way of obtaining a fresh financial start, often allowing an individual to become debt free in as little as 9 months.

The amount you pay back is governed by federal legislation and is based on your family income.

Both of these options immediately stop all collection activity and protect you from garnishment of your wages.