Broke, unemployed, and in debt? Here’s what to do

Posted on 24 May 2022

Written by Colin Boulton

Unemployment or job loss is undoubtedly one of the toughest scenarios any of us can go through. It is difficult not knowing when you will receive your next pay cheque, or how quickly you can find another job. Coupled with a lack of savings and debt that is racking up, the situation can be crippling. The last thing you need is to be chased by creditors for their next debt repayment when you do not know where it will come from, or if you can ever make the repayments. In the worst scenarios, collection calls can be harassing, and you could even receive threats of a wage garnishment. But here is the good news – there is always a solution. No matter how bad your circumstances, at Spergel, we have over thirty years of helping Canadians begin a fresh financial start. So, if you’re broke, unemployed, and in debt, this article is for you. Below, we outline your options and the next steps you should take to get your life back on track. The sooner you take action, the sooner you can move on with your life.

Broke, unemployed, and in debt – where do I start?

When your financial situation becomes overwhelming and you are unsure of what to do, the best thing to do is to contact your lenders, and review your situation to understand what needs to be done. Here are the steps you should take if you find yourself broke, unemployed, and in debt:

Contact the National Student Loans Service Centre (NSLSC)

If you have student loan debt and took out a government funded student loan, you should contact them as soon as you can if you are going to struggle making your payments. In this instance, you can see if you are eligible for repayment assistance, or even to reduce your monthly payment. The NSLSC will happily discuss your options with you to help you get back on track. If your student loan was provincial, you should contact your province to discuss if it was taken out from Alberta, Manitoba, Nova Scotia, or Prince Edward Island. These options can help to reduce or even eliminate your student loan debt when you need it, and stop your debt getting worse while you are out of work. It also avoids missing payments, which can impact your credit score. Once you find another job, you can increase your monthly payments once again to work on reducing the principal of your student debt.

Inform your mortgage lender

If you have a mortgage, you should let your lender or financial institution know as soon as you can. There should be no problem with your mortgage while unemployed unless you default on payments and cannot stay current. While defaulting on your credit card debt could risk you being taken to a civil court, the consequences are much more severe when defaulting on your mortgage payments. You could face foreclosure on your property, and potentially lose your home. In most scenarios, lenders will want to avoid this scenario due to the additional expenses incurred, so they will want to work with you first. For this reason, it is important to let them know if you find yourself broke, unemployed, and in debt. Typically, they will grant forbearance meaning you could receive a pause on your monthly payments while you work on finding another job. As soon as you find a job, your owed payments would then be restored.

Contact any other lenders

It is not just your mortgage lender you need to inform of your unemployment. You will need to make arrangements with any lender you owe payments to. You can simply call them to inform them of your situation, and ask if there are any options that may help you to pause or reduce your payments while you look for work. The worst thing you can do in this scenario is to ignore the problem and hope it goes away. Avoiding the scenario could lead to more severe consequences like harassing collection calls and even wage garnishment. If you take a proactive and communicative stance with your lenders, it will help. The worst case is that you will still need to make your payments, but you could stop your payments temporarily, or even reduce them in the best cases. If you have car loan debt, your car lender may offer forbearance so that you can be relieved of the risk of repossession.

Review your debts and expenses

Now that you have contacted all of your lenders, you should make a record of each of your debts and bills so that you understand the details of everything you owe. Capture this along with the interest rate for each debt, and the dates by which your payments are due. Once you have completed this exercise, you should have a fairly accurate picture of all your required outgoings. Without the income you originally had coming in from your job, you need to urgently minimize your outgoings. In order to reduce your expenses, cut down on any non-essential costs, like dining out, takeouts, streaming services, and any subscriptions. See if there are any utility packages you can downgrade to save on bills and expenses. A key skill is also learning how to budget, so that you can reduce your costs on essentials like groceries. This will help to minimize any financial damage so that as soon as you get a new job, you are able to recover as quickly as possible.

How to bring in income while you look for work

Once you have taken the steps above to minimize damage on your debt and address any outstanding payments, your next priority if broke, unemployed, and in debt will likely be to bring in any cash you can while you search for employment once again. These days, thankfully there are so many options for boosting your income outside of full time employment. Consider turning your creative skills into paid freelance work, like design, illustration, or copywriting. You could develop a side hustle through selling art, babysitting, or dog walking, or even taking on some work as a delivery driver. Another suitable option for generating some extra cash is selling any old or unwanted items like clothes or electronics. You may even wish to secure a part time role to help to pay the bills while you find a permanent role. Of course, make sure you allow yourself enough time to be focused on finding full time employment in your specialist field.

Find a suitable form of debt relief

In your situation, you may be tempted to take out a loan for short term cash. While an option, it is extremely important to remain vigilant in this instance. It can be tempting to take out a payday loan or cash advance loan but to find yourself racking up payday loan debt with an extortionate interest rate pretty quickly. Although this can help tide you over for a month, you may quickly realize that you cannot afford to make your repayments. These options to be wary about also include home equity loans (HELOCs) where you borrow against the equity in your property. As a secured loan, if you default on payments you could be at risk of losing your home. If you are unemployed, it could also be difficult for you to secure one of these loans. Regardless, it is always important to speak to a financial expert to understand the risks associated with taking on additional loans while struggling financially. At Spergel, our Licensed Insolvency Trustees have over thirty years’ experience of helping Canadians who find themselves broke, unemployed, and in debt. As Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief, they are the best sources of advice for gaining debt relief. They will help you to understand the risks and advantages of each form of debt relief. When you are unemployed, you are unlikely to have the funds available to repay a loan, so it is best to avoid them. Here are some debt relief solutions that may be more appropriate when you have unmanageable debt:

Debt consolidation

If you have multiple debts in Canada, a debt consolidation loan may be a good form of debt relief for you. A debt consolidation loan is a new loan that you take out. It works by condensing your multiple separate debts into one to allow for a single monthly payment. As well as simplifying your debts, it often results in the reduction or even elimination of your interest rate. They can help you to budget too, by helping you to prepare for the single payment you need to make each month instead of multiple repayments. It is also possible to spread out your payments across a longer period of time to lower each monthly payment and make them more manageable. Typically, in order to take out a debt consolidation loan, you need a steady source of income to make your monthly payments plus interest. If you are broke, unemployed, and in debt, you should speak to a Licensed Insolvency Trustee who will advise you as to the most suitable form of debt relief for you.

Consumer proposal

In Canada, a consumer proposal is a debt settlement program that is legally supported by the Canadian government. Consumer proposals can reduce debt by up to 80% – use our debt calculator to see how much you could save. It is a deal put in place with your creditors to reduce your unmanageable debts. A Licensed Insolvency Trustee is required to administer a consumer proposal, and they will work with you to establish how much you can affordably repay on your debts each month. Your trustee will then negotiate with your creditors on your behalf. At Spergel, we have an acceptance rate of 99% on all consumer proposals we file. Advantages of a consumer proposal include the ability to keep your assets, and protection from your creditors via a stay of proceedings. If you are unlikely to find a job any time soon, it may not be the most appropriate option for you as consumer proposals require a monthly payment. Your trustee can support you to discuss whether or not it is the right form of debt relief for you, and alternative options that may work better.


If you find yourself broke, unemployed, and in debt, filing bankruptcy may well be the best debt relief solution for you. Bankruptcy is the process of assigning any non-exempt assets you may have, over to your Licensed Insolvency Trustee, in exchange for the clearance of your debts. It is the debt relief solution for offering debtors a fresh financial start. Bankruptcy has a number of advantages, including protection from creditors, full clearance of debts, and the ability to keep some essential assets. At Spergel, unlike other bankruptcy firms, you will receive your own dedicated trustee to walk you through every step of the bankruptcy process. There are costs associated with bankruptcy, but your trustee can explain how to file bankruptcy despite being unemployed. If you are having trouble establishing your financial situation, your Licensed Insolvency Trustee will be able to help you. Bankruptcy can help to reduce the amount of anxiety brought on by creditors harassing you, and will immediately stop them taking any action. For any tax debt, bankruptcy will prevent the Canada Revenue Agency seizing your pension or taking other actions against you. Filing bankruptcy will help you to move forward with your life.

At Spergel, our Licensed Insolvency Trustees have over thirty years’ experience of helping Canadians who find themselves broke, unemployed, and in debt. Whether you are changing careers, experiencing a reduction in household income, or trying to consolidate your debt, we can help you on your journey to becoming debt free. Book a free consultation today – you owe it to yourself.

Colin Boulton

Colin Boulton

Colin Boulton is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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