Recognize When You Have Too Much Debt

Being in debt is a pretty common experience. Most individuals carry some kind of debt. The average credit card balance is now $6,200, and the companies providing this money have on average boosted borrowing limits by 20% over the past ten years. Add in student loans, mortgages, car loans, and other types of borrowing, and you see how it’s become so common to owe money.

While owing money is normal, the ability to recognize when you have too much debt can help you fix the problem and keep the situation from getting worse. Getting debt-free is a healthy financial goal that, once achieved, opens up your opportunities to do more with your money.


If you’re in too much debt, one thing you can do is contact a licensed insolvency trustee to discuss solutions. They offer a number of tools including bankruptcy, consumer proposals, and credit counselling that will give you a chance to get a handle on your debts and even reduce your obligations to your creditors.

Getting Out of Debt with Bankruptcy or Consumer Proposals

These are both insolvency options that will forgive a portion of your debt while giving your unsecured creditors a chance to recover some of what they’re owed. They are effective ways to reduce your debt and pay it back without interest.

They come with significant financial consequences, as they will be recorded on your credit report, make it harder for you to qualify for credit in the future, and you may have to either give up assets or make monthly payments for up to five years. However, they may be better alternatives than struggling to pay it all back yourself.

How Much Debt Is Too Much?

Filing for bankruptcy or a consumer proposal is a major financial decision. You should be able to recognize when you have too much debt and should consider these debt solutions. There are several ways you can evaluate your debt load.

#1 Debt-to-Income Ratio

One way to determine whether or not you’re overburdened is looking at your debt-to-income ratio. As a rule of thumb, if you owe more than 40% of your annual income in unsecured credit (not including your mortgage), that’s generally considered too high. You would be unlikely to qualify for new loans and may struggle to make payments.

#2 Credit Utilization Rate

Your credit utilization rate is an important contributor to your credit score. It’s a ratio of how much credit you are currently using (carrying as a balance) compared to your total credit limit. Once your utilization rate increases beyond 30% of your available limit, your credit score can start going down.

#3 You Can’t Make Payments

Finally, rates and ratios don’t matter much when you simply can’t make payments on credit card bills or personal loans. If you’re stuck making minimum payments, missing payments, or having to choose between one bill and another, it’s time to get in touch with a licensed insolvency trustee.

There are options for settling debt when you can’t make payments or you’re overburdened. Talk to a licensed insolvency trustee about your options.

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