Tensions between the United States and Canada regarding tariffs have resulted in new economic pressures for businesses and families across both nations. As incomes decline and living expenses rise, some families find themselves relying on credit cards to manage their finances, leading to an accumulation of debt.
A recent inquiry from a Canadian reader to a financial expert highlighted this distressing situation. The individual reported that over the past year, due to a decrease in his wife’s work hours, their household finances had gradually tightened. Currently, they owe approximately CAD 14,000 across two credit cards, along with an additional CAD 2,000 in bank overdraft debt. Though they consistently make the minimum payments and do not have any missed payments, their bank has declined to assist them with debt consolidation. The wife is aware of the household’s poor financial status, yet the couple has been avoiding the conversation, helpless as their debts continue to grow.
According to the latest data from the New York Federal Reserve Bank’s Microeconomic Data Center, by the second quarter of 2026, the outstanding balance of unpaid credit card debt in the United States had surged to USD 1.26 trillion, marking an increase of USD 54 billion compared to the same period last year.
For some families in North America, even with stable jobs and income, it is still possible to slip into debt due to reduced earnings and rising expenses. In light of this troubling trend, it’s crucial to be proactive in identifying financial issues, managing debts, and seeking appropriate assistance. Both Peta Wales, the President and CEO of the Canadian Credit Counselling Society, and the U.S. Consumer Financial Protection Bureau (CFPB) have provided vital advice for those facing such challenges.
The first step in addressing debt is not to rush into taking out new loans to pay off old debts but to first clearly list all outstanding obligations.
Creating a simple spreadsheet can help track each debt, including amounts owed, interest rates, and minimum monthly payments. This should encompass credit cards, overdrafts, personal loans, and any other installment payments.
Following this, households should calculate their monthly income and essential expenses to see how much they can allocate toward debt repayment after covering costs such as rent or mortgage, utilities, food, and transportation. If the monthly income falls short of covering living costs and minimum repayments, it becomes imperative to seek help as soon as possible.
The Financial Consumer Agency of Canada (FCAC) recommends prioritizing repayment of the debts with the highest interest rates to minimize interest expenditures. Alternatively, settling the smallest debts first can help individuals see progress more quickly. No matter which method is selected, maintaining the minimum payments on other debts is crucial.
The American CFPB also advises individuals to evaluate income and expenses to identify areas for potential cuts. If even the minimum payments are unmanageable, it is wise to estimate a realistic repayment amount and discuss repayment arrangements with credit card companies.
A denial of a debt consolidation loan by a bank does not imply that there are no other available options.
Borrowers can reach out directly to credit card companies or lenders, explaining their situation of reduced income and repayment difficulties, and inquire about options for lowering interest rates, extending repayment terms, or establishing alternative repayment methods. The CFPB also stresses the importance of reaching out to credit card companies at the first sign of repayment challenges rather than waiting until payments are overdue.
For those finding it challenging to navigate these issues alone, nonprofit credit counseling agencies can provide assistance. Both the U.S. and Canada have such organizations that can help evaluate personal financial situations, create budgets, and set up debt management plans.
Under creditor agreement, some debts may qualify for reduced interest rates or fees, allowing borrowers to make regular payments as arranged through the counseling agency. Generally, these plans do not outright waive the principal amount owed, but they may reduce interest rates or monthly repayment burdens. Before signing any agreements, it is essential to verify that creditors accept the plan and to understand any associated service fees.
Both countries also present different legal options for individuals facing significant debt issues.
In Canada, those with severe debt problems can consult with a licensed insolvency trustee about options such as Consumer Proposals or bankruptcy proceedings. A Consumer Proposal allows individuals to propose a repayment plan for a portion of their debts within a specified timeframe. Once approved by creditors, they can complete their payments as agreed and legally discharge the debts covered by the proposal, with repayment terms typically lasting up to five years.
In the U.S., individuals may assess their eligibility for Chapter 7 or Chapter 13 of the Bankruptcy Code based on their income, assets, and debt circumstances. Chapter 7 typically involves the legal handling of certain assets to discharge qualifying debts, while Chapter 13 enables individuals with regular income to establish a court-approved repayment plan, typically spanning three to five years. Both procedures have specific conditions and varying impacts on assets and credit records; thus, it’s advised to consult professionals familiar with bankruptcy law beforehand.
Dealing with debt issues does not need to wait until payments are overdue, collection notices arrive, or legal action looms.
Couples can set aside time to discuss their finances without placing blame, openly examining the debts and household income. There may not be an immediate need to find all the answers, but understanding the current financial situation is a critical first step.
For those uncomfortable discussing finances with family members, reaching out to trusted friends or seeking assistance from professional credit counseling agencies can provide support. Several nonprofit credit counseling agencies in Canada offer free initial consultations; similar services might be available in the U.S., but future plans could incur fees, so it is essential to inquire about costs and services upfront.
Moreover, consumers in both countries are warned to be cautious of debt resolution companies. Some of these firms may claim to significantly reduce debts but require substantial upfront fees or may advise borrowers to stop making payments to creditors altogether. Such actions can lead to continued accumulation of interest, late fees, and potentially provoke collection activities or legal actions. Before signing any agreements, consumers should thoroughly understand service fees, repayment structures, and potential impacts on credit records.
In Canada, only licensed insolvency trustees are authorized to handle personal debt restructuring plans and bankruptcy processes; in the U.S., personal bankruptcies must adhere to federal bankruptcy laws and related court protocols. Consumers should verify the qualifications of service providers through official channels and be wary of promises that guarantee quick debt resolutions.
In conclusion, when faced with reduced income and increasing debt, proactively inventorying one’s debts, reaching out to creditors, and seeking professional assistance when necessary can be more effective for struggling households than merely avoiding the issue. Taking these steps can be instrumental in controlling financial risks and ultimately improving one’s situation.