Out of Work and In Debt? Here's How To Manage It

Picture the Canadian economy as a rugged little boat navigating a dark and angry sea. It’s afloat and somewhat on course, but a pair of cold, steely waves are rearing up behind it.

The first: rising unemployment, which hit 7% in May and could increase another half-percent by the end of the year, according to Oxford Economics Canada.

The second: intensifying debt struggles. Equifax recently reported that 1.4 million Canadians missed a credit payment in the first quarter of 2025, with non-mortgage delinquencies rising by almost 9% year-over-year.

The economy, which has the Bank of Canada and federal government manning its deck, is unlikely to capsize. But for individuals dealing with both unemployment and a heavy debt load, it can feel a lot like drowning.

Losing your job while in debt doesn’t mean a financial shipwreck is inevitable. There are ways to make it to shore.

Keep things in perspective

If you hope to tackle your debt in a healthy, proactive way, the emotional impact of job loss can’t be ignored. It’s important to process the change you’re going through and put it in its proper context.

“People feel very isolated when they lose a job,” says Mark Kalinowski, a partnership and education specialist at the Credit Counselling Society. “The first thing we remind people of is they’re not alone. Lots of people are in the same boat, lots of people have debt, lots of people have income changes. It’s going to be a temporary setback, and it’s going to be okay.”

Nancy Snedden, partner and national personal debt solutions leader at BDO Canada, says people mistakenly believe that it’s only workers earning low incomes or frivolous spenders who find themselves in debt trouble.

“Not the case at all,” she says. “Most of the people that come to us looking for a solution for their debt, it’s because of a life event that’s happened. Losing your job is a life event, and it’s out of your control most of the time.”

Adjusting to your new reality won’t happen in a vacuum. You’ll need to process while taking steps to reshape your finances. The longer you wait, the tougher it’ll be to right the ship.

Call a professional

Debt and unemployment are not topics the average person is dying to discuss. But when you’re dealing with both, it might require an experienced professional to set you on the right track.

“You wouldn’t try to fix your own arm if it was broken. You’d go to the doctor. So if you need help with your finances, talk to an expert,” Snedden says.

A credit expert, such as a counsellor or licensed insolvency trustee, may offer free introductory calls that can be used for fact-finding.

“There’s a lot of misinformation out there, a lot of blurred lines,” says Grant Bazian, president of the insolvency practice at MNP, a professional services firm. “Go to a debt professional to get the real information.”

Bazian says talking to a professional and learning what options are available often puts people in a better headspace. At that point, it’s easier to take action.

Set some guardrails

Establishing a budget isn’t fun in the best of times, but it’s essential if you’re balancing a job loss and debt.

“What we see is that income or job loss is immediate. But adjusting a person’s lifestyle, that can take months if we’re not consciously attending to it right away,” Kalinowski says. “The sooner we can get on top of the budget, cut out some stuff and make life a little bit more affordable, the better.”

A post-job loss budget should include four components:

Income: Severance, employment insurance, etc.
Expenses: Daily, weekly and monthly spending.
Debts: Credit cards, car payments, mortgage, lines of credit, loans.
Assets: Savings, investments, real estate.

When deciding what expenses to cut, Kalinowski urges people not to be too extreme. Joy needs to be preserved, especially at a time of high stress, to ensure “we have something that entertains us and keeps us happy,” he says.

A regular book buyer, for example, might start making trips to the library instead of the bookstore; a home decor enthusiast could limit their searches to yard sales and refurbishing projects. The core activity is maintained, but the cost is reduced.

Try to fill the income gap

Unemployment doesn’t come with an expiry date. Knowing it could outlast your EI payments is one of the most stressful aspects of being out of work.

Rather than waiting until EI starts running low, think about ways you might be able to generate some extra cash now. You might consider:

Starting a side hustle based on a hobby or skill.
Doing odd jobs around your neighbourhood.
Joining the gig economy.
Selling unused vehicles, ATVs or boats.
Renting out a room in your home.

Improving cash flow might also require taking on more strategic debt. A debt consolidation loan may be an option if you can find a cosigner. An untapped HELOC can also help you pay down higher interest debt, though it will have to have been arranged prior to your job loss.

Ask for relief

It’s not an option in every instance, but some of your creditors may be willing to offer you new or less stringent repayment options in the event of a job loss.

Bazian says relief may be provided by the Canada Revenue Agency, banks, mortgage lenders and even credit card companies. But upholding whatever agreement is reached is a must.

“If you make a commitment to a creditor and you don’t follow up with it, that trust is blown. And then it’s harder to get anything further out of them,” he says.

Still employed? Practice preventive medicine

Managing your debt while unemployed is easier if there’s less debt to deal with when job loss happens.

Both Bazian and Kalinowski say they’ve encountered consumers who could have made things easier by following time-tested financial advice: track your spending.

“There are those people that come and see us because they just haven’t been paying attention and the credit cards got away from them. So if you are budgeting and if you’re on top of your money, you’re less likely to fall into that group,” Kalinowski says.

“I think there’s definitely a big gap in financial literacy amongst a lot of the people that we see coming through our doors,” says Bazian.

Another way to prevent yourself from being buried by debt, regardless of your job status, is to reach out for advice as soon as things get worrisome.

“It’s always better to know what your options are,” Snedden says. “You can feel a sense of relief just knowing that you’re getting some advice.”

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