Household debt in Canada: what to do if yours is high

Posted on 4 July 2023

Written by Chris Galea

Headlines have been made recently around Canada’s household debt being higher than any other G7 country. This might sound alarming, particularly along with rising interest rates and a high cost of living in recent times. It means that a large amount of Canadians are feeling stretched, with many making changes to their lifestyle or moving further out of cities in the hope of cheaper rents and living costs. In fact, three quarters of the household debt in Canada is tied to mortgages. While housing needs to be made more affordable by the government, you may be wondering which actions you can take to manage your own household debt. In this article, we explore the consequences of household debt in Canada, and what you can do to address your own financial circumstances.

What are the consequences of high household debt in Canada?

Having a high household debt can have a number of different consequences:

  • Less disposable income in households to partake in enjoyable activities
  • It can lead to widespread job loss when significant economic events occur, like a recession
  • Failed mortgage payments, especially with an increased number of unemployed Canadians
  • Repossession via foreclosure or power of sale can come about when mortgage payments repeatedly go unpaid

What to do if your household debt is high

You may well be wondering how you can find out if your household debt in Canada is high. It may be helpful to see the average debt by age in Canada to see how you compare. If your household debt is high, there are some actions you should take to get your debt levels under control sooner rather than later. With further anticipated interest rate hikes on the horizon, the sooner you manage your financial situation, the better. Carrying a large amount of household debt can play havoc with your mental health, as well as affecting your credit score which can affect your ability to borrow in the future. The longer it takes to repay, the more interest you will need to pay off over time. There are a few tactics we suggest to get out of debt. You are certainly not alone in facing debt, and many Canadians benefit from the following strategy:

Create a budget

It is very difficult to make a plan to gain debt relief unless you know exactly the amount of debt you have, and any associated interest rates. It is a good idea to create a budget on a spreadsheet. Here, you should record exactly how much you owe across each debt, each of your creditors, and the interest rate on each. You can then look at your income sources so you understand exactly how much money you have to deal with. The thought of creating a budget can seem daunting, but the reality is it is the first step to gaining debt relief. If you are finding it difficult, reach out to an experienced Licensed Insolvency Trustee. As the only professionals in Canada able to file all forms of debt relief, they are expertly placed to assess your financial circumstances without judgement and advise you on the best pathway to debt relief. You should also be wary of any firms offering a quick way out of debt. Generally speaking, if it took a while to get into, it will take some time and commitment to get out of debt too.

Negotiate with your creditors

One way to attempt to reduce your household debt in Canada is to negotiate the terms or interest rate associated with your debts. There is no obligation for them to do so, but in some instances if you explain your financial situation and show that you are trying to make your repayments, they may agree. They could allow you to have a reduced interest rate, or to extend the payment terms so that your monthly payments are reduced. If you do reach an agreement, make sure you get it captured in writing from your creditor. Remember there is no guarantee for them to agree to anything, and they will only have their debts in mind. Be careful not to agree to anything that could make your financial situation worse, or compromise other debts that you may need to repay.

Consider debt consolidation

Although not strictly intended to reduce household debt in Canada, debt consolidation has a number of key benefits. If you have a number of different debts, like credit card debts, payday loans, or tax debts, debt consolidation could be helpful for you. A debt consolidation loan is a new loan that is taken out to condense multiple other loans into one. It has the advantages of simplifying multiple debts into one simple monthly payment, and often reduces or even eliminates the associated interest rate.

Explore your household debt relief options

If the above measures do not seem drastic enough to help reduce your household debt, there are some legal debt relief options available to you. All you need is to book a free initial consultation with a Licensed Insolvency Trustee. They will review your financial circumstances confidentially and advise you on the best pathway to debt relief for you. Two of the most popular forms of legal debt relief in Canada are consumer proposals and bankruptcy.

Consumer proposal

A consumer proposal is a legal form of debt settlement that can reduce your debt by up to 80%. Administered by a Licensed Insolvency Trustee, it is the process of suggesting an affordable monthly repayment figure to your creditors. If approved, you will only need to make your manageable payments for a period of up to five years. Other advantages of a consumer proposal include the ability to keep your assets, and full protection from your creditors via a stay of proceedings. At Spergel, we have a 99% acceptance rate on any consumer proposals we file. This means that when you file with us, you have a 99% chance of reducing your household debt by up to 80%.


Bankruptcy in Canada 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 household debt. They are sold with any proceeds going towards the repayment of your creditors. Advantages of bankruptcy include receiving protection from your creditors, and a fresh financial future. Unlike other bankruptcy firms, at Spergel, you are assigned your own Licensed Insolvency Trustee to walk you through the entire bankruptcy process from beginning to end instead of being passed from person to person.

How long should it take to pay off household debt?

It is difficult to put a timeframe on how long it should take to pay off household debt in Canada. It depends on your unique financial circumstances – how much you can repay each month. By being determined and committed to making your monthly payments and anything you can in addition, you are likely to pay it off sooner. If you are unrealistic about what you can pay off each month, you could create a situation where you end up with more debt instead. Having financial goals in mind and using either the debt snowball method or the debt avalanche method can help you to stay motivated in repaying your household debt.

Want to know more about how to reduce or eliminate your household debt in Canada? Book a free consultation with an experienced Licensed Insolvency Trustee at Spergel. We have been helping Canadians to gain debt relief for over thirty years, and we are here to help you too. We will review your financial circumstances and recommend the best pathway to debt relief for you.


Chris Galea

Chris Galea 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 tax debt, COVID debt, and the region of Saskatchewan, Canada. When he’s not at the office educating people about bankruptcies and consumer proposals, Chris is playing pick-up hockey with his friends, spending time with his family, and learning Spanish!

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