Are you drowning in debt? Have calls from creditors become a constant nuisance? Is it hard to set aside money for your personal needs and goals because you owe so much to credit card companies, banks, and other businesses? Over the past few years, the costs of housing and food have risen dramatically, making financial challenges feel more urgent for many people.
Being in debt can be incredibly stressful. However, you don’t have to face it alone. Every day, people muster the courage to say “I am drowning in debt and need help!” Then, they seek out reliable debt counsellors who can help them take control of their financial future.
In this article, we’ll walk you through what “drowning in debt” really looks like – not just in numbers, but in everyday life, explain the warning signs to watch for and share relief options to help you get back on track.
How Many People Are Drowning in Debt?
According to data from Statistics Canada, Canadian households owed approximately $3.07 trillion in total credit-market debt in the first quarter of 2025. Credit-market debt includes mortgages, credit cards, lines of credit, personal loans, and any other forms of borrowing.
Statistics Canada also reported that the household debt-to-disposable-income ratio climbed to about 173.9% during the same period. This means that for every dollar Canadians earn in after-tax (disposable) income, they collectively owe about $1.74 in credit-market debt. Put simply, many households now carry significantly more debt than take home in income. For many Canadians, this imbalance shows up as everyday financial stress, such as worrying about keeping up with monthly payments, having little room for emergencies, and feeling like they’re falling behind despite having steady income.
While mortgages make up the largest share of household debt, non-mortgage or consumer debt is also a major factor. This includes credit card balances, personal loans, and lines of credit – financial obligations that often come with higher interest rates than mortgages. According to TransUnion’s Credit Industry Insights Report, the average Canadian carries $26,415 in non-mortgage consumer debt, up from $25,786 in 2024. As this type of debt rises, many Canadians are finding it harder to keep up, especially as the costs of housing, food, utilities, transportation, and other essentials have increased dramatically in recent years.
What do these numbers look like in real life? “Drowning in debt” can look different for everyone. For some – especially those who have experienced job loss, a medical emergency, or other unexpected expenses – it can mean juggling multiple debts while trying to cover everyday essentials. For others, it’s making the minimum monthly payments on time, yet seeing no real progress on the balances.
Excessive debt can create a vicious cycle. If you owe a lot, you end up paying more towards your interest than to your principal balance, which means it takes longer to become debt-free. When money is already tight, it can be tempting to take on more debt to pay for various necessities. This can turn into a pattern of using one form of credit to pay another, causing the debt to grow bigger and be even more difficult to pay down. This vicious cycle becomes a massive whirlpool of debt for some – metaphorically drowning them in debt with no clear path forward.
Even if your own situation doesn’t match the national averages, these trends show that the pressure of debt is widespread. Many Canadians are quietly dealing with the same worries, the same stress, and the same feeling of trying to stay afloat financially.
Warning Signs You’re Drowning in Debt
“Am I drowning in debt?” This is a very important question to ask yourself, and there are a few warning signs to watch out for. This can include things like:
- Debts never seem to shrink. You make every monthly minimum payment, yet the total balance barely moves (or it even increases). This often happens when you’re only making the minimum payments, which primarily goes to interest and very little chips away at the principal amount.
- You can’t pay your monthly minimums. Sometimes, the amount of money you owe can start to outpace your ability to pay it back. If you find that you can no longer afford to pay your creditors and cover basic necessities (like food, housing, and utilities), then you might be carrying too much debt.
- You’re receiving constant collection calls. If creditors are sending your information to collection agencies, it’s a strong warning sign that they think you’re struggling and they’re at risk of not getting paid what they’re owed.
- You see a decline in your credit score. One of the things that affects your credit score is how much credit you are using versus the amount available to you. If you’re riding your limits too closely, your credit score may drop since creditors will see you as more of a risk.
- You’re playing “hot potato” with credit balances. Some people might try to put off paying down debt by using their credit cards to pay them off. This game of “hot potato” (where you pass the buck from one card balance to the next) can only delay debt – it doesn’t actually help eliminate it. It may stall things temporarily, but ultimately the total debt remains and usually gets worse.
- Avoiding checking bank accounts or credit statements. If you’re ignoring statements because it makes you anxious, that’s a common emotional sign of financial distress.
- Hiding finances from partners/family or feeling shame around money. When you find yourself hiding how much you owe or avoiding conversations about money, that emotional burden often accompanies heavy debt.
- Stress, anxiety, difficulty sleeping, or physical symptoms. When debt affects mental or physical health, it’s a serious signal that help is needed.
Recognizing these warning signs is a positive first step toward regaining control of your finances. If you notice any of the above, it’s important to seek out help to reduce or eliminate your debt as soon as possible.
One of the most important factors for those who successfully get out of debt is their ability to adjust priorities. Almost everyone wants to be debt-free, but those who have been in debt long-term or notice it’s starting to impact things they value most, like their family or their health, are often motivated to refocus and take steps toward financial improvements.
What Are My Options if I’m Drowning in Debt?
If you feel like your debt is overwhelming you, you’re likely already past the point where simply tightening your budget can stop your balances from growing. However, there are different debt-relief options available to help you get back on track:
Debt Consolidation Loans
If you’re drowning in debt but still have good credit (what qualifies as “good” can vary by lender), you may want to look into getting a debt consolidation loan. This is a great way to manage your debt while minimizing the impact to your credit score.
How does a consolidation loan work? The basic idea is that you take out a loan equal to the total amount of debt that you currently have and use that to pay all of your other creditors. This helps in a couple of ways:
- Simplifying your debt repayment. Instead of being in debt to a dozen creditors, you will only owe a single creditor. This makes arranging your payments easier and less stressful.
- Reducing the interest on your debt. If you have good credit, there is a strong chance you’ll be able to get a favourable interest rate on your consolidation loan. In some cases, this may be lower than your average interest rate on other debts. However, this isn’t always the case.
Unfortunately, not everyone who is drowning in debt can get a loan with good terms. This option is best suited for people who still have a strong credit score and stable income. Lenders usually require proof that you can make the payment, so this may not be accessible if you’re already struggling. If you’re seen as too much of a risk because of a low credit score, banks and other lenders likely won’t lend to you.
One of the most common missteps is turning to a high-interest loan or payday lender to consolidate debt. These options should always be evaluated with an unbiased credit counsellor first. Without expert guidance, many end up paying thousands more in interest than necessary.
Debt Consolidation Programs
This is another method of consolidating debt that can be helpful for those who want structure and relief from interest but don’t qualify for a bank loan. It’s also a safer alternative to high-interest consolidation lenders.
Instead of taking out a loan to pay debts, a Debt Consolidation Program (DCP, often referred to as a Debt Management Program) is when a non-profit credit counselling agency works with your creditors to stop or significantly reduce the interest on your debts. Where a DCP is similar to a consolidation loan is how it rolls everything into a single, easier-to-manage payment.
Some people might prefer to avoid DCPs because they have to give up their unsecured credit cards while on the program. However, people who need to use credit cards can still do so with secured or prepaid cards during the program.
With a DCP, most creditors require a stable, predictable monthly payment. As long as you can make that payment every time, this can be an accessible option even for those with lower credit scores. A DCP is typically customized based on your current debt situation, allowing you to pay it off within 48 months (4 years) or less. The goal is to create a payment plan that won’t put too much of a strain on your resources while eliminating your debt.
Think this might be the right debt-relief approach for you? Learn more about enrolling in a Debt Consolidation Program.
Consumer Proposals
A DCP is often the best way to take care of debt before it gets too out of hand. However, these programs aren’t for everyone. If your debt is too great, it may be necessary to pursue more drastic measures to eliminate it. One such measure is filing a consumer proposal.
This is geared towards “insolvent” debtors – people who have more debt than they can realistically repay, but who want to avoid bankruptcy and maintain more stability in their financial future.
Consumer proposals are legally regulated and to file one, you must work with a Licensed Insolvency Trustee (LIT), who arranges for you to pay a portion of your debt or extend the time you have to pay that debt back (or both).
This is a near-last resort measure for people drowning in debt – one that creditors may not accept if they think that the proposal is less favourable to them than bankruptcy proceedings (where they may be able to recoup some costs from selling your assets). Creditors who do accept consumer proposals often do so because they’d rather recover a portion of what they’re owed instead of risking not getting paid at all.
Filing for Bankruptcy
Where a consumer proposal allows you to pay only a portion of your debt back to your creditors or extend your timeline for repayment, filing bankruptcy proceedings will eliminate most of your debts almost immediately. While both procedures are overseen by LITs, there can be a world of difference between the two – both during and after they’re done.
Bankruptcy is most appropriate for people who genuinely cannot repay any meaningful amount of their debt and is usually saved as a last resort. You must meet specific insolvency criteria to qualify, and an LIT will evaluate your finances before recommending this option.
A bankruptcy filing will have a severe negative impact on your credit. Typically, you can expect your credit rating to be R9 (the lowest there is) for at least six years after being discharged from bankruptcy.
Additionally, your LIT may end up having to sell some of your assets to cover your debts – filing for bankruptcy doesn’t mean your creditors get nothing. Depending on your circumstances, this could include non-exempt assets such as a second vehicle, recreational vehicles, investment properties, valuable collectibles, non-registered investments, or excess home equity. The specific means of sale will vary depending on your situation. For example, it might be necessary to prioritize speed of transaction over the value of the sale. This may result in you getting less from the sale of your assets than you might have gotten otherwise.
Reach out to a Non-Profit like Credit Canada for Help
Remember, you don’t have to face your debt alone. There are resources and non-profit credit counselling agencies available to help you understand your debt and create a roadmap for getting out of it. For example, our debt calculator can help you learn more about your debt and how long it might take you to pay it off based on your current financial situation.
If you need practical steps on how to get out of debt, contact Credit Canada. Our certified Credit Counsellors can provide free, non-judgmental guidance for managing your debts. As a non-profit credit counselling agency, our advice remains client-focused, centred on what is best for you and what will support your overall financial goals most effectively. Contact us today by calling 1(800)267-2272 or talk to our AI Agent, Mariposa.
Frequently Asked Questions (FAQs)
What is a Debt Consolidation Program?
A Debt Consolidation Program (DCP) is an arrangement made between your creditors and a non-profit credit counselling agency, like Credit Canada. With this debt relief option, a certified Credit Counsellor will negotiate with your creditors on your behalf to drop the interest on your unsecured debts, while also rounding up all your unsecured debts into a single, lower monthly payment.
Can I enter a Debt Consolidation program with bad credit?
Yes, you can sign up for a DCP even if you have bad credit. Your credit score will not impact your ability to get debt help through a DCP. However, bad credit can impact your ability to get a debt consolidation loan.
Do I have to give up my credit cards in a Debt Consolidation Program?
If you enter a DCP in Canada, you will have to refrain from using credit, which includes unsecured credit cards. However, you can still use a secured credit card. Once you've successfully completed the program, you may be eligible for an unsecured credit card.
Will a Debt Consolidation Program hurt my credit score?
Most people entering a DCP already have a low credit score. A DCP can lower your credit score at first, but if you keep up with the program and make your monthly payments on time as agreed, your credit score will eventually improve in the long run.
Can you get out of a Debt Consolidation Program?
Anyone who signs up for a DCP must sign an agreement. However, it's completely voluntary and any time a client wants to leave the program, they can. Once a client has left the program, they will have to deal with their creditors and collectors directly. In addition, if their credit counsellor negotiated interest relief and lower monthly payments, these will likely no longer be an option.
