How to Get Out of Debt –
Taking Control of Your Debt

Twelve Ways to Get Out of Debt

How to Get Out of Debt - 12 Ways of Getting Out of Debt Just as there are many different ways you can get into debt, there are a number of different solutions for getting out of debt.

Here are some things to consider when you are wrestling with your debt problem.

Which one you choose is your decision.

Remember, there is a solution for everyone.

With our debt advice and debt help services you can become debt free in as little time as possible!

Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation

Call 877-879-4770


Option 1: Do Nothing


Many individuals are what is known as “judgement-proof.”

This means they have income from welfare, old age pension, or the Canada Pension Plan.

This type of income is next to impossible to garnishee, and in some cases, the law prohibits a garnishee.

Many collectors will still contact these debtors, but there is nothing they can do to enforce collection.

They can only verbally press the debtor for payment.

Often, setting up an unlisted telephone number will prevent calls, but be warned, a persistent creditor may be able to find an unlisted phone number.

Option 2: Negotiate a Compassionate Write-off With Your Creditors

You can have someone write to the debt collectors explaining your situation and the impossibility for you to repay your debt.

Often, elderly people or individuals with a terminal health condition, who have little income and few assets, may approach creditors and ask that they forgive or abandon their outstanding debts.

This should be done in writing and all creditors should respond in writing.

If the creditor writes off the debt, your good credit rating and credit score will be lost.

Debt owed to the Canada Revenue Agency can in some cases be reduced on compassionate grounds.

The CRA enacted fairness provisions in 1991 to allow for the cancellation, reduction, or waiver of certain penalties and interest owed.

Usually, exceptions are made when a debt is incurred due to circumstances beyond someone’s control, such as –

  • Natural or human-made disasters, such as flood or fire;
  • Civil disturbance or disruptions in services, such as a postal strike;
  • Serious illness or accident;
  • Serious emotional or mental distress, such as the death of an immediate family member.

Option 3: Use Your Assets

If you have assets with some significant equity, such as a home or a car, you may be able to use these to get control of your debt.

For example, you could get a loan on your home that is sufficient to pay off your debts.

You could be saving a considerable amount of money on interest if you pay off high-interest credit card debt in return for lower-cost debt.

If you have a car, consider selling it, paying off your debts, and buying a cheaper car.

Be careful though!

You don’t want to buy a “cheaper” car that will cost you a fortune in repair costs.

Option 4: Get a Second Job

Use the money from this job only to pay off your debts.

Make a list of all your debts, noting the interest rates.

Pay off the debts with the highest rates first and work your way down the list.

Once the debt is paid you can quit the job, or continue working to build an emergency savings account.

Option 5: Put Your Credit Cards on Hold

One of the best steps to take to become debt free is to immediately stop using credit cards.

At the very least, destroy all your cards, keeping just one for emergencies.

Option 6: Get a Consolidation Loan

A consolidation loan can make lots of sense.

Get a loan from your bank or credit union to pay off all your many debts so you have just one payment to make.

The new loan usually has a smaller payment and a lower interest rate.

Option 7: Cut Back on Expenses

You will be surprised at how much money can be saved if you cut back on certain activities such as smoking, buying coffee from the coffee shop every day, or eating out.

Use the money you save to pay down your debt faster.

We recommend using the debt snowball method, a technique where you pay the smallest debts first to gain momentum in knocking out your debts.

Option 8: Use a Credit Counsellor

Credit counsellors can assist you in acquiring the discipline you need to get control of your debt.

Don’t assume that just because you have used a credit counsellor you will get a better credit than if you declare bankruptcy.

In most cases, using a credit counsellor will be much more expensive than declaring bankruptcy.

A debt settlement company can help you find a counsellor.

Option 9: Use Your Province’s Orderly Payment of Debt System

Residents of some provinces (AB, NS, PEI, SK) can apply for a consolidation order.

This provision of the Bankruptcy and Insolvency Act allows you to pay off your debts, usually over a three-year period, and clears you from creditor harassment and wage garnishment.

You can contact the following offices for orderly payment of debt information in your province.

Alberta –


NS –

Option 10: Make an Informal Proposal

In some cases you can make a proposal to your creditors to set up a payment plan that will allow you to pay your creditors in an orderly way and thus help preserve your credit rating.

This operates similar to a debt consolidation loan except you do not borrow the money to pay off your creditors.

In an informal proposal, you may be able to pay less than 100 cents on the dollar.

For example, a relative may be willing to pay a lump sum to the creditor, of say, 50 percent of the amount owed in order for the balance of the debt to be written off.

This works best when there are very few creditors.

This should be done in writing and all creditors should respond in writing.

You will lose your good credit rating.

Option 11: File a Consumer Proposal Under the Bankruptcy and Insolvency Act

Under the Bankruptcy and Insolvency Act, a bankruptcy trustee files a consumer proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both.

To qualify for a personal proposal, your creditors must be better off under a proposal than if you go bankrupt.

Proposals have a number of advantages for the debtor who is under a great deal of pressure from his creditors.

Option 12: File for Bankruptcy

Filing bankruptcy is the ultimate solution to taking control of your debt.

Once you have gone bankrupt, by law, creditors cannot take any action against you to collect any unsecured debt.

Creditors are also prohibited from seizing your assets and garnisheeing your wages.

Bankruptcy allows you to get rid of your debt, and, in most cases, keep your assets.

If you find yourself always making the minimum payment, a debt settlement plan is needed and we can help you come up with the correct plan to follow.

These, and other debt relief options, can help you get your debts under control.

Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation

Call 877-879-4770