You are over-indebted when you are unable to pay bills and debt repayments.
Over-indebtedness can creep up gradually and unnoticeably. Failure to pay bills can lead to a debt spiral. If you take out a loan to pay bills, you increase your debt burden. Taking out new loans in addition to previous ones can result in the total amount of loan repayments being ultimately higher than your income allows. Once your finances have become too tight and you have no savings, each new expense may be too much.
You can also become over-indebted through no fault of your own. Unemployment, bankruptcy of your own business, illness or just unfortunate events such as, for example, mould in your home, may devastate your finances.
As a result of over-indebtedness, your debts may go to collection and you get a payment default entry in your credit data file.