In Ontario, you’re protected by the Ontario Collection and Debt Settlement Services Act (the “Act”). The Act sets out strict laws on what a debt collection agency can - and cannot - do. Among other things, it attempts to curb collection agencies from using harassing or intimidating tactics to get you to repay the debt you owe. Here's what this law covers.
Are you feeling burdened by household debt? Is it difficult to come up with the money you need to make your car and mortgage payments? Are you and your partner constantly arguing about money? Or, are you worried that a job loss or medical emergency might push you over the financial edge?
Well, you are not alone.
Canadian debt has been growing substantially for more than a decade. According to Statistics Canada, Canadians owe $1.71 in credit market debt for every dollar of household disposable income. In other words, for every dollar the average Canadian makes, they owe $1.71. And things aren’t expected to get better.
A recent survey conducted by Ipsos reports that over half of Canadian households are $200 or less away from insolvency. And, 44% of Canadians are worried that they will be in financial trouble if interest rates continue to rise. Similarly, 51% of Canadians are concerned about how they will pay their debts with increasing rates. Further, 35% of Canadian’s worry that increasing rates could push them towards bankruptcy.
How is Household Debt Defined?
Household debt encompasses all of the debt that is owed by the people living in one household. Canadian household debt includes Canadian consumer debt in addition to mortgage loans. For many Canadians, the expenses associated with paying student loans, credit card bills, and auto loans can be difficult to handle.
According to a recent report by the Bank of Canada, Canadian households are accumulating more debt with the main contributor being an expensive mortgage. Many households are taking on mortgages that are too high relative to their income, putting many Canadians in a precarious financial position. If a job loss or a medical emergency occurs, many won’t have the savings or income needed to weather the financial storm.
Federal Debt Levels
If you think the amount of household debt you’ve acquired is staggering, just look to the federal debt levels to make you feel outdone. According to the Canadian Taxpayers Federation debt clock, Canadian national debt currently sits at approximately $1.146 trillion. Each day, Canadian debt grows by over $424 million.
One consequence of high Canadian federal debt is the hefty interest payments. Similar to household debt, governments are responsible for making interest payments to their lenders. When more tax dollars are required to go to interest payments, this means there is less money available for healthcare, education, and other social services.
Canadian debt-to-GDP ratio
The debt-to-GDP ratio compares how much money a country owes (public debt) to the country’s economic output (gross domestic product (GDP).
The debt-to-GDP ratio is often used to determine how long it will take a country to pay back its debt. The higher the debt-to-GDP ratio, the longer it will take. A high debt to GDP ratio can result in high-interest rates from lenders and can even make it difficult for a country to borrow money. You can think of a country’s GDP in terms of household income. The higher the income (or GDP), the more resources you have available to pay back your debt. The lower the income (or GDP), the fewer resources you have to pay off your debt.
In 2020, Canada’s debt-to-GDP ratio reached a high of 117.8. This means that Canada’s public debt exceeds its economic output. According to a study by the World Bank, countries with a debt-to-GDP ratio that exceeded 77% for an extended period will often see a slowdown in economic growth. This is all to say, you are not alone. The country of Canada is also struggling to pay its debt.
How to Reduce Your Household Debt
If you are concerned about your rising level of household debt and the potential for Bankruptcy or Consumer Proposal, there is help available.
Reach out to a Licensed Insolvency Trustee (LIT) to discuss your debt concerns and talk about debt management options. A LIT is a federally regulated professional who can provide advice and services to help you with your debt problems. A LIT can do everything from offer one-on-one debt counselling to administering a Bankruptcy or Consumer Proposal.
If you are struggling with debt a household budget may help. Our Income and Expense spreadsheet can help you understand the debt that you have and if you are bringing in enough to pay for your expenses.
You Don’t Have to Deal With Debt Alone
If you are in debt, know that you are not alone. Unfortunately, debt happens. It happens to individual Canadians, and it even happens to the country. If you are feeling stressed out about how you will pay your bills, reach out to a Licensed Insolvency Trustee (LIT) as soon as possible. Call Adams and Associates at 519-310-JOHN (5646) for a no-obligation consultation. Or, reach out online at Adamsontrustee.com.