4 ways to find debt relief when CERB runs out

Household debt in Canada remains high. Including mortgage debt, the average household owes $1.77 for every dollar earned. And the coronavirus pandemic is making it more difficult to many household to keep up financially. Two-thirds of Canadians are concerned about their ability to pay their bills because of the added financial strain. When incomes decline, like during a global recession, personal debt becomes more difficult to pay back, and the basic necessities become more challenging to afford.  

Even when you’re only able to make minimum payments, debt can make up a large portion of your monthly bills. If you have opted to defer any mortgage payments, credit card bills or student loans, there will be added pressure. Any interest that you accrued during the deferral period will be added to the total amount you owe and may increase your minimum payments. What can you do to lighten your debt load and live more comfortably? Here are four ways to find debt relief when CERB and other related programs like Employment Insurance (EI) come to an end.

1. Weighing your debt load.

One of the first steps to measuring your financial health is to figure out how much you owe. Create a list of all your outstanding non-mortgage debts, from lines of credit to store credit cards. You can calculate your debt-to-income ratio by dividing all your non-mortgage debt by your annual income (before taxes). Debt loads from 20 per cent to 40 per cent should encourage you to devise a debt repayment strategy. You can consider these two debt repayment methods:  

• the avalanche method (if you’re concerned about interest charges) 
• the snowball method (if you want to start small and build motivation)  

If your debt load is greater than 40 per cent of your income, you’re likely feeling overwhelmed. You can talk with a Licensed Insolvency Trustee who can explain all the debt relief options that are available to you.

2. Downsizing your expenses before CERB runs out.

Preparing yourself for a post-CERB budget is key. Will you have enough income to pay your bills and allow for some wiggle room? Do you know how long you can continue deferring your mortgage, credit card or student loan payments? If you prepare ahead of time — over a few months and not weeks — you can start making the changes you need to adjust accordingly. If creating an emergency budget and cutting out unnecessary spending isn’t enough, you may need to consider more drastic measures. Moving to find work, getting by with one vehicle instead of two, or finding cheaper accommodation are very effective ways to improve your cash flow.

3. Finding the right type of debt relief.

Downsizing your debt load is one of the best ways to reduce your expenses. If you have credit card balances, payday loans or other high-interest debts, a debt consolidation loan can simplify your bill payments and reduce your interest charges. 

If you are not eligible for a line of credit or a debt consolidation loan, however, other debt solutions are available. A Licensed Insolvency Trustee can meet with you over the phone to go over your financial obligations and help you explore all of your options. If you think you are able to repay some of your debt, a consumer proposal may be the right debt solution for you. With a consumer proposal, your debt owing can be reduced to a portion of what you owe. When your debt has become unmanageable and you are unable to make your payments, filing for bankruptcy can provide you with immediate relief from debt. Bankruptcy is not an easy decision, but it can give you a fresh start and allow you to plan for a debt-free future.  

4. Taking the time to plan ahead. 

The economic fallout from the coronavirus pandemic has been devastating for Canadians who make their living in certain industries. Hospitality and retail workers, in particular, are facing important questions about their future, as many establishments are in danger of not reopening.  

If you’ve been considering a career change, now is the time to do some soul-searching and some research. Changing job paths can be intimidating but also rewarding. Your existing employment experience may reveal transferable skills that will serve you well in a different setting. Or you might consider retraining. The federal government’s job bank includes a listing of all the industries that continue to hire during the pandemic. On a provincial level, many governments have announced retraining grants that can help you launch a new career.  

When the financial and economic crisis is still evolving, it can be hard to know how to adapt. But it’s also a good opportunity to shake things up. Try to focus on the things you can change, like doing what you can to take control of your financial situation. Finding the right debt relief strategies is an important step toward improving your financial health and well-being.    

If debt is holding you back, you can learn more about debt management by joining the conversation with us on Twitter and Facebook. #LeaveDebtBehind