How to manage out of-control debt

Rob Hart knows how quickly debt can spiral out of control. In 2005 the oil field was booming and he was making good money. He had a house, an quad bike, an RV, and a truck.

Then came the bust.

“I had all the boy toys, you would call them,” Hart said. “And I lost absolutely everything.”

Hart said the bank took everything. He had to move back in with his parents, was in his mid-thirties and was juggling more than $180,000 in debt. Lifestyle changes were not enough to deal with this, and creditors garnished his wages and prevented him from making any progress.

“Mentally it was really tough for me,” he said. “Very hard.”

Hart’s story is not unusual. Many people struggle with personal debt, and a new report from Equifax shows consumer debt has risen to $2.32 trillion this year – with Albertans having the highest amount of non-mortgage debt, averaging over $25,000 to have.

“Debt itself is not bad. It’s only bad if you can’t control it,” said Freida Richard, a licensed bankruptcy practitioner. She said being in debt is normal until it starts creating anxiety and stress and impacting mental health, work and relationships.

“If you know that the source of these stressors is debt, then you know it’s a problem.”

The first step to fighting debt is knowing where to start and setting a goal, Richard said. She adds that you should also be willing to make changes.

“I always think of aggressively dealing with debt as an exercise in financial self-reflection because it’s really about being realistic and honest about where you sit with the debt and being willing and willing to make decisions,” she said.

Once you know what you owe, you can budget and find places to spend less or make more. For example, Richard said, finding alternatives to that gym membership or taking on a few extra shifts at work. You can also think about downsizing.

“Sometimes you can make your things work for you by reducing your debt by selling those things,” she adds.

If you’re like Hart and lifestyle changes aren’t enough to regain control, there are other options.

Richard said you can talk to a banker about debt consolidation, where debt is combined and repaid as an unsecured loan or line of credit. This allows you to pay off multiple debts in one payment, often at a lower interest rate. She adds that homeowners may also be eligible for a home equity line of credit.

Debt management and repayment programs also exist at nonprofit credit counseling agencies, Richard said, like Alberta Credit Counseling and Money Mentors Alberta.

And if none of that works, you can request a consumer proposal.

“Which a consumer proposition is basically offering to pay back less than 100 percent of what you owe in total,” Richard said.

It’s an arrangement, brokered by a licensed liquidator, Richard said, that takes debt management out of the hands of creditors.

“It’s a great option for the consumer because it avoids bankruptcy. They’ve found a way to pay off their debt that’s affordable and fits their budget,” Richard said, but cautioned that it’s a big step and should be the last option before bankruptcy.

Hart was approved for a consumer bid three years ago, but it wasn’t a quick fix, and he’s still working to manage that debt.

“I am by no means free of my debts. I don’t think I ever will be,” Hart said, adding that the best advice he has is to keep track of bills and reach out if you need help.

“There are free counselors out there to help you with your debt,” he said. “Do not be ashamed. . . Everyone goes through it. Seek help, even if it’s just a family friend or colleague or someone else.”

With files by Alison MacKinnon.