Medical Issues and Debt | How Medical Issues and Disability Can Lead to Debt And What Support Exists

How Health and Disability Affect Income

Medical issues and disabilities often affect a person’s ability to work consistently, or at all. Statistics Canada’s recent profile of persons with disabilities in Canada shows that adults with disabilities are less likely to be employed and more likely to work part‑time or experience interruptions in employment compared to those without disabilities. Illness or disability can make it impossible for someone to work, or they may need accommodations that employers are unable or unwilling to provide. Thus, they may be forced to reduce hours, change roles, take unpaid time off for treatment or recovery, or cease working altogether. That loss or reduction of income is often the first turning point in a debt story.

Also according to Statistics Canada, people who are experiencing financial difficulties report much lower life satisfaction than those who are financially stable. Dealing with health problems can cause stress and despair. For someone already dealing with health challenges, the stress caused by financial strain can exacerbate health issues and cause an already difficult mental and emotional situation to become overwhelming.

Out‑of‑pocket costs can add up

Canada’s public health system covers many core services, but it doesn’t eliminate out‑of‑pocket costs. Things like medications, physiotherapy, transportation to appointments, home modifications, and private supports can fall largely on the individual.

For someone living with a chronic condition or disability, even relatively small recurring costs can become unmanageable when income is reduced.

Many people in this situation turn to credit cards, lines of credit, or high‑interest loans to cover their out-of-pocket medical costs. At first, this can feel like a reasonable short‑term solution, especially if the person is hopeful that their medical issues will be resolved and they will be able work regularly soon, but over time, the balance grows, interest accumulates, and it becomes harder to keep up.

Delays and gaps in benefits

There are programs designed to support people who can’t work due to illness or disability such as Employment Insurance sickness benefits, provincial disability programs like AISH, and the Canada Pension Plan Disability benefit. But these programs often involve:

• Lengthy application processes
• Documentation requirements which require multiple medical appointments
• Waiting periods before benefits begin

During those gaps, people still need to pay rent, buy groceries, and cover medical costs. It’s common for individuals to rely on credit while they wait for a decision or an appeal. If benefits are denied or end up being lower than needed, the debt that accumulated in the meantime can quickly become unmanageable.

Governments have shown an interest in designing and adjusting programs for people whose daily activities are limited by long‑term conditions. But at this point, many people still experience a disconnect between the support they need and the support they receive, particularly in the short term.

Why this often turns into serious debt

When you combine all of these factors (reduced income, higher expenses, and delays in support), it is not hard to understand why debt becomes a part of the picture. Common patterns that we see include:

• Using credit cards to cover everyday expenses while off work
• Relying on lines of credit to bridge gaps between pay and benefits
• Taking out personal high interest loans to pay for medical or disability related costs
• Falling behind on bills and facing collections when payments can no longer be maintained

Government and Income supports

Depending on a person’s circumstances, they may be eligible for:

• Employment Insurance sickness benefits
• Provincial disability benefits, such as Alberta's Assured Income for the Severely Handicapped (AISH)
• Canada Pension Plan Disability (CPP-D)

Tax credits and deductions

Some people benefit from:

• The Disability Tax Credit
• Medical expense tax credits
• Caregiver‑related credits

Community and non‑profit resources

Depending on where you live, there may be:

• Non‑profit financial counselling services. An example in Calgary is Momentum
• Equipment loan programs
• Transportation assistance, such as Calgary's United Way Assisted Transportation Program
• Peer or support groups, such as those available in Calgary at Carya or the Women's Centre of Calgary

Formal debt‑relief options

If debt has already become unmanageable, it may be time to look at options such as a Consumer Proposal or bankruptcy. Both options can immediately stop collection calls and ultimately eliminate your debt.  

These processes can include unsecured debts like credit cards, lines of credit, personal loans, and some tax debts, even if those debts arose because of medical or disability‑related challenges.

Health issues and disabilities can change a person’s life in ways that go far beyond the medical diagnosis. When those changes lead to debt, rather than focusing on what they could have done differently, start by making a plan to deal with the debt. Once you have a plan in place, you can focus your energy on fixing the situation. The mental and emotional load that is lifted when you have implemented a realistic plan just may help you in managing your health issues as well.

If medical issues or disability have contributed to your financial stress, you’re not alone. Talking to a Licensed Insolvency Trustee doesn’t commit you to any particular solution, but it can give you a clearer understanding of your options and a path forward that takes both your finances and your health into account.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the Alberta region. We regularly help individuals consider their options when they are facing overwhelming debt incurred as a result of being victimized by scammers. If you'd like to explore the options, please reach out to us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.