Ashley, 32, is $40,000 in debt and has no extra cash flow. Should she consider bankruptcy?

Thirty two year old Ashley has no idea where to start with her mountain of debt. She has nearly $40,000 she needs to pay off and she feels completely stuck. “I've been carrying around some form of high debt since I was 18,” Ashley says. “My biggest struggle is I just feel overwhelmed with how much is owing that I just don't know where to start.

I don't know how to budget and keep up with it.” Ashley is who are missing monthly payments on non mortgage bills as consumers slip further into debt amid high interest rates and a rising cost of living. She has $18,000 of Ontario Student Assistance Program (OSAP) debt still owing as well as $12,000 of credit card debt.

But perhaps most concerning is a loan that has a staggering interest rate of 47 per cent. “I have ADHD as well and impulse buying is something I struggle with,” she says. Ashley works as a sales representative making on average $2,800 a month depending on her sales commission. She doesn’t have a lot of free time because she is always working and says that she doesn’t have the money to do anything whenever she does have time off.

Ashley admits to self sabotaging. She says she thinks to herself: "It's just money, who cares. I have an apartment and a car, I'll never own a house, so who cares about my credit score,” and then later realizes she has dug herself further into debt. “I have been thinking about getting a second job, but I am already stressed and burnt out working the one I have.

I don't think I could find the time or energy either physically or mentally to have a second job,” she says. What can Ashley do to pull herself out of debt? We asked her to share her expenses to see what she can do. Ashley is 32 years old and has been carrying debt since she was 18. Some of it relates to her schooling with $18,000 of Ontario Student Assistance Program (OSAP) debt still owing.

But she has nearly $40,000 of debt in total including $12,000 of credit card debt with rates as high as 26 per cent. She also has four other loans including one at a whopping 47 per cent interest rate. Her goal is to focus on debt repayment over investing. This is definitely the right approach. Investing when you have high rate consumer debt is usually not a good strategy.

You would need to earn a higher return on the investments than the interest rate on your debt, which is not likely with double digit interest rate debt. She should start with the highest interest rate debt first and work her way down from there with her repayment strategy. That said, $40,000 of debt is quite a bit when Ashley does not have any extra cash flow from month to month.

She is hesitant to get a second job as she is already burnt out. If she cannot decrease her expenses or increase her income, her debt repayment goal could be a tough one. She could consider a consumer proposal with the help of a licensed insolvency trustee. This could potentially reduce her debts with a negotiated reduction in her balances owing and consolidation into a single monthly payment.

Looking at Ashley’s expenses, there appears to be a lot of discretionary spending. This ranges from fast food to lattes to video games to lottery tickets. I hate to pick on Ashley’s pets, but nearly 10 per cent of her spending is on food for her dog and cat. Ashley acknowledges that her ADHD is an impediment to her budgeting since she is prone to impulse buying.

Credit counselling may help through a combination of one on one advice, group sessions and debt management plans. If you want to save or pay down debt, you have to increase your income or decrease your expenses. If you have high payments on high interest rate debt, a consumer proposal or even a bankruptcy should be considered.

It could be a short term strategy to be in a better place financially in the long run..