What to do when you're in debt

Rob Hart knows how quickly debt can get out of control. In 2005, the oilfield was booming and he was making good money. He had a house, a quad, a holiday RV and truck.

Then came the bust.

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

Hart said the bank took it all. He had to move back in with his parents, in his mid-thirties and juggling over $180,000 is debt. Lifestyle changes weren’t enough to get on top of it and creditors were garnishing his wages, keeping him from making progress.

“It was really hard on me mentally,” he said. “Really hard.”

Hart’s story is not uncommon. Many people struggle with personal debt, and a new report from Equifax shows consumer debt rose to $2.32 trillion this year - with Albertans having the highest amount of non-mortgage debt at over $25,000 on average.

“Debt in itself isn’t bad. It’s only bad if you can’t control it,” Freida Richer, a licensed insolvency trustee said. She said having debt is normal, until it starts creating anxiety and stress, and impacts mental health, work and relationships.

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

The first step to tackling debt is knowing where you’re starting from and setting a goal, said Richer. She adds you should also be ready to make changes.

“I always view tackling debt aggressively as an exercise in financial self reflection, because it really is about being realistic and honest about where you sit with the debt and being willing and prepared 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, Richer said, finding alternatives to that gym membership or picking up some extra shifts at work. You can also consider downsizing.

“Sometimes you can make your things work for you by reducing your debt through the sale of these things,” she adds.

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

Richer said you can talk to a banker about debt consolidation, where debts are combined and paid off as an unsecured loan or line of credit. This lets you pay off multiple debts as one payment, often with 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 not-for-profit credit counseling agencies, Richer said, like Alberta Credit Counseling and Money Mentors Alberta.

And if none of those work, you can apply for a consumer proposal.

“What a consumer proposal is basically offering to pay back less than 100 per cent of what you owe in total,” Richer said.

It’s an agreement made through a licensed insolvency trustee, Richer said, that takes the debt management out of the hands of creditors.

“For the consumer, it’s a great option because they avoid bankruptcy. They’ve found a way where they can settle their debts that’s affordable, that fits within their budget,” Richer said, but warns it’s a big step and should be the last option before bankruptcy.

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

“I’m not free and clear from my debt by any means. I don’t think I ever will be,” Hart said, adding the best advice he has is to stay on top of bills and reach out if you need help.

“There’s free counselors out there that will help you with your debt,” he said. “Don’t be ashamed. . . Everyone goes through it. Seek help, even if it’s just a family friend or a coworker or somebody.”

With files from Alison MacKinnon.