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I Can’t Pay My Debt

By Troy Tisserand

The moment you realize you can’t pay your debt off, it feels like a punch in the gut. The most important thing to do is don’t panic. Maybe you recently got divorced, lost your job or suffered from ill health, and you’re thinking to yourself, “what the heck am I going to do?”.  Now is the time to begin taking stock of what you owe and how much you need to pay off. 

The inability to clear off debt is a reality many people grapple with across the globe. But, there’s no need to feel overwhelmed – if you’re in the same predicament, you’re not alone. Success in life is 5% what happens to us and 95% how we deal with it. With the right mindset, education and help, you can change your life around. 

5 Step Process To Follow When You Can’t Pay Your Debt [FREE]

Myth: I’m The Only One Struggling With Debt

In a world where credit is increasingly accessible, and society often encourages ‘buy now, pay later’ culture, many individuals find themselves in a cycle of debt. It may be comforting to know that many others are also facing similar issues with indebtedness. Although this shared experience doesn’t negate the stress and challenges involved, it’s essential to remember resources and guidance can ease the path forward.

52% of Canadians say they are $200 away or less from not being able to meet all of their financial obligations, according to the latest report from the MNP Consumer Debt Index.

69% of those surveyed by MNP said they’re feeling the effects of interest rates, and 66% said they’re worried about their ability to pay their debts as rates rise, with around three in five respondents expecting to be in financial trouble if rates go up much further.

Bottom line: everyone across the country is feeling the effects of rising interest rates and cost of living. You’re not alone and there is help out there for people in your position. 

Liquidation statements don’t have to be difficult… Follow these steps to create yours

Warning Signs That You Can’t Pay Off Your Debt

Certain signs indicate that you may be approaching, or already in, a situation where you can no longer pay off your debt. 

These could include

  • Making minimum payments only 
  • Skipping or delaying payments
  • High credit utilization rate
  • Borrowing to pay other debts
  • No savings
  • Frequently overdrawing your bank account
  • Receiving collection calls or letters
  • Stress and anxiety about money
  • No idea what you ower
  • Applying for new credit and being denied

Acknowledging these signals can be the first step in actively addressing your debt situation.

Steps to Take When You Can’t Pay Your Debt

If you find yourself unable to repay your debts, it’s crucial to take a proactive approach:

Step 1: Assess your financial situation

Start by writing down all your assets and what you think they might be worth if someone were to buy them. This includes your home, vehicles, and investments (like RRSP’s).

Then, create a list of all secured debts you owe. These are financial obligations that are tied to your assets. A good example is a home with a mortgage on it. The home is your asset, and the mortgage is the secured debt against it. 

Finally, create a list of the unsecured debts you owe. These are debts that were not used to purchase any assets on your list, such as credit cards, lines of credit, overdrafts and consolidation loans.

Step 2 – Create a Liquidation Statement

Now, if you sold your assets and paid off the loans against them, you will get your equity. You can then go ahead and create a liquidation statement. 

If it is positive, you may have other options to deal with your debts, such as liquidating assets or borrowing money against them

If the number is negative, it means you might be a good candidate for a debt restructuring

Please note: debt restructuring does NOT mean you will lose your assets.  Every situation is different, but confidentially speaking to a 4 Pillars representative is your first step to learning more about your options.  

Get a complete checklist and more details on what to do when you can’t pay your debt.

Options for Dealing With Your Debt

With a better understanding of your overall financial situation, you should now consider what options you have for dealing with your debt.  Here is a list of the options for Canadians to deal with overwhelming debt.

  • Do Nothing
  • Borrow from friends and family
  • Obtain a consolidation loan
  • Credit Counselors
  • Consumer Proposal
  • Bankruptcy

All of these options have their own pros and cons, and some are more complicated than others.  The next step is to decide how you want to execute on your option to do deal with your debt.

I Can’t Pay my Debt, How Long Before Collections Come?

As your financial situation deteriorates, it may be only a matter of time before you begin to fall behind on your credit card statements. 

If you can’t pay for your home, read this resource on home foreclosures, click here to access that resource

Usually, unsecured debts always follow the same pattern:

Stage 1

When you are 30 days past due, they will reach out and attempt to help you get caught up. During this time, you may lose access to your credit, and their collection department may be in contact with you.  Your missed payments will start to report negatively onto your credit bureau

Stage 2

After about 90 days, they may ‘write off the debt’ and/or send it to a collection agency.  At this stage, 3rd collection agencies will register the debt as a “debt in collection” and, in almost all cases, increase the intensity and frequency of their collection of the debt.

Depending on what you disclose, the amount of debt and your particular situation your debts may stay in this stage for months or up to years, being handed off from collection agency to collection agency

Stage 3

At this stage, your debt collection will go in 1 of 2 basic directions

  1. Written Off – for smaller debts, the creditor ‘gives up’ and writes off the debt, and although you still owe the debt, it may no longer be in collections
  2. You get sued – the debt is handed over to a lawyer, and the lawyer pursues the collection of funds through the provincial court system. The lawyers draw up documents, file them with the court and work to obtain a judgment against the debtor.

Disclaimer: 4 Pillars are not lawyers. If you have any questions about the legal system, please contact your lawyer for legal advice.  None of the explanations should be construed as legal advice, as this is just general advice about the legal system.  For more information, please contact https://www.legalline.ca/

Upon judgment, the court will order a Judgment Debtor Examination. The goal of the examination is to examine the financial affairs of the debtor under oath to reach a settlement arrangement. You can read more about it here: https://www.legalline.ca/legal-answers/judgment-debtor-examinations/

Other options under the court order enforcement would be garnishing wages and/or applying to the courts to liquidate debtor assets in pursuance of the debt.

At any time through this process, a debtor can file for protection from their creditors to resolve their debt problems.


Debt is an unwelcome pressure for anyone, and the reality of not being able to repay it can be a significant burden. However, resources, professionals, and strategies exist to help navigate through this challenging situation. Acknowledging the problem, taking proactive steps, and making use of available resources can set you on a path toward resolving your debts and regaining financial health.

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