The Psychosomatics of Debt: How Overextension of Credit Stresses People Out

Observations from the front lines of consumer insolvency, and the scientific evidence.

I always tell new clients that our product is sleep. We sell sleep.

They think about that for a second and then it makes sense.

People who have been heavily indebted for a prolonged period of time have been experiencing great stress and anxiety, often for so long that their bodies and psyches have become accustomed to it. It tends to make them somewhat catatonic in terms of tackling the problem once and for all. That’s why we figure it takes people somewhere between 12 and 24 months from the time they finally decide they will never repay their debts on their own until they pick up the phone and call us.

There is a hopelessness realization that sets in: take a look at the ‘Estimated Time To Pay’ statement on your credit card bill if you carry even a small balance. This is the calculation that lenders are required to disclose to you if you make only your monthly minimum payments required (which are often mostly interest.) It is nothing to see this estimation in the many years into the future. (see sample below – and this is only on a balance of $1,398!)

Carrying a heavy debtload can also have major restrictions on what people are able to do with scarcer resources, and this effects social interactions, leading to a further spiral into mental health issues (isolation, brooding, substance abuse, insomnia, etc.). Our clients frequently report such issues to us. The breakdown of families, friendships deteriorating as contact is lost due to financial pressures forcing one to cease going out with friends, etc. Social isolation can be a major problem when it comes to a substantial debtload.

Add to those concerns job security worries (especially heading into a period of expected/potential job loss/recession), food security issues (generational inflation), having to rely on family for funds – the embarrassment and shame contributing to loss of self-esteem. We often hear such experiences and how they led over time to an inability to extract oneself from such a doom loop.

And it is widely known that married couples fight over money more than anything else. If you add considerably consumer debt to that picture, the problem is undoubtedly worse. As resources ($) gets more scarce in the household, couple may take to trying to spend it while it’s available – essentially in competition with each other living paycheque to paycheque. Sadly, children can end op suffering due to this.

Accounts ending up in collections can cause relational stressors that undermine well-being through negative interactions with debt collectors, financial strain, role strain, and stigma. (https://www.forbes.com/advisor/banking/american-debt-and-the-mental-health-epidemic/) Forbes Advisor conducted a study in September of this year 2024 in the US with indebted consumers, with some staggering results.

“As a result of debt-related stress, 48% of the respondents reported experiencing sleep difficulties, 40% noted an increase in anxiety levels, 38% reported a diminished social life and 34% indicated they have depression.”

As a result of debt-related stress, 48% of the respondents reported experiencing sleep difficulties, 40% noted an increase in anxiety levels, 38% reported a diminished social life and 34% indicated they have depression.”

The study also found that debt can even be a gateway to more debt:

• “38% of people said they missed payments and incurred extra charges because their debt stressed them out.

• 23% mentioned that stress made it hard for them to manage their money and pay off their debts as they planned.

• More than half of the people (56%) felt guilty when buying things, and 53% felt overwhelmed when they needed to spend more money.”

These results would be no different in Canada. Certainly not form what we see in our clients every day.

And the scientific data available for the effects of debt on health are seemingly endless.

I studied neuroscience in university and several of the courses and seminars dealt with the subject of psychosomatics – “relating to, involving, or concerned with bodily symptoms caused by mental or emotional disturbance.”  The state of the mind can have serious effects on the body. And carrying heavy debt is a terribly harsh burden on the mind.

The scientific literature shows that financial strains can be both objective (i.e., stressor events) and subjective (i.e., perceived stress). Either contribute to mental health problems.

In one study (Ryu and Fan, 2022 https://pmc.ncbi.nlm.nih.gov/articles/PMC8806009/), The Relationship Between Financial Worries and Psychological Distress Among U.S. Adults, it was found that “…psychological distress was more pronounced among the unmarried, the unemployed, lower-income households, and renters than their counterparts.”  This is certainly supported by not only our work with clients every day but also our Joe Debtor https://www.hoyes.com/press/joe-debtor/ findings (our annual study of our client base) – that single people renters and lower income households are struggling much more than others. The continuous strain of managing a household on a single income, and without the fallback of home equity, can run one’s finances – and mental health - into the ground.

A consumer proposal filing provides for two mandatory one-on-one credit counselling meetings between the trustee and the debtor. One of these is soon after the proposal voting period (45 days after filling) and the other is a few months after that.

Because we do so many proposals, we get to see the way people are when they first contact us and then again half a year into their proposal. And the differences are often striking.

At the time of their second counselling meeting, clients appear much more relaxed and happy generally. It can take several months for this to take effect for somebody who has grown accustomed to the burden of debt and collectors for so long. Our clients often report that a great weight has been lifted off them by deciding at last to address the debt once and for all. The Stay of Proceedings provided by the proposal filing also means the constant phone calls, texts and emails stop. I note that many clients are able to focus on their work and families much more after they have filed.

We will study this phenomenon of consumer debt psychosomatics further in forthcoming posts.