How to Get Out of Debt: Bankruptcy and Alternatives to Bankruptcy

Bankruptcy and Alternatives to Bankruptcy For Dealing With Debt

Debt can easily creep up on you, starting with the odd extra bill to pay and ending in an assemblage of credit cards, each trying to pay off the minimum payment on the other.

In a short while, a molehill size debt can snowball into a mountain, leaving you in despair and struggling to find a way out.

You may feel alone with your money worries, but every year thousands of Canadians file insolvency claims to help them to get out of debt.

In 2019 alone 140,858 people filed for bankruptcy or put in a consumer proposal to assist them with their finances, and thousands more used other debt relief services to get them back on track, and the good news is that you could too.

Read on to find out about what you can do to get out of debt in Canada.

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How to get out of debt in Canada

Debt is not a one-size-fits-all problem, which means that there isn’t a one-size-fits-all answer.

Generally, the way that you approach your debt will depend on two key factors:


  1. The size of your debt;
  2. What you, personally, can do about it.


Here are a few of the things that you can do in Canada to help you to get out of debt.

Rearrange your own finances

In some cases, debt can be easily accumulated with poor money management, meaning that it can also be relatively easily solved with better financial practices.

If your debt is quite small and you still have money coming in, then rearranging your finances is a good place to start.

Begin by laying everything out in plain sight on paper, including your total debt amount, your income and your monthly expenses – don’t leave anything out.

From this information, you should now be able to see whether you have enough money coming in to cover your outgoings, and where you may be able to start making cutbacks.

Remove any unnecessary expenses and redirect this extra cash towards paying off your debts.

If you have several credit cards, then it makes the most financial sense to try and pay off the one with the highest interest first, though, it can be more psychologically rewarding to pay off your ‘debt snowball’ which is the card with the lowest balance first.

Whichever method you choose, just stick at it and plug away until your debts have been resolved.

Enlist the help of a credit counsellor

If your debts feel too high to solve, or you simply feel incapable of handling your situation alone, then you may want to consider enlisting the help of a credit counsellor.

A credit counsellor will be able to talk you through essential money management skills and will also help you to come up with a plan to tackle your debts.

In some cases, a credit counsellor may even be able to liaise with your creditors to negotiate you a lower interest rate and an affordable payment plan.

Consider debt consolidation

Not everyone is able to qualify for a debt consolidation loan, but if you do, then it can replace all of your individual debts with one monthly payment.

A single payment, often at a lower interest rate, makes it a lot easier for people to stay on top of their debt and to make regular repayments, ultimately helping them to get in the clear.

Enlist on the Orderly Payments Of Debts Program

If you live in the province of Alberta, Saskatchewan, Prince Edward Island, or Nova Scotia, then you may be able to enlist on the Orderly Payments of Debts (OPD) program.

The OPD program was designed as a debt repayment alternative to bankruptcy, allowing you to pay a single monthly repayment, tailored to what you can afford, at a lower interest rate of 5% and also providing you with access to financial planning resources and services.

File a consumer proposal

If you earn a stable income, but still have debts that you are unable to handle alone, then you may want to look into filing a consumer proposal with a Licenced Insolvency Trustee.

Your Licensed Insolvency Trustee will work with you to determine a single monthly repayment that you can afford within your budget and will put together a consumer proposal to send to your creditors.

Once your Licenced Insolvency Trustee has filed your proposal, your creditors will no longer be able to threaten to take you to court and will have 45 days to accept or to reject your proposal.

Despite a consumer proposal often meaning that creditors will receive less than the full amount owed, most are accepted, as it is better for creditors to get some money back than none at all if you have to file for personal bankruptcy.

Many people choose to file a consumer proposal before considering bankruptcy as a consumer proposal will often save many personal assets, such as their house, and their credit is not as badly affected.

File for personal bankruptcy

Lastly, if all else has failed or you do not have a secure income to repay a significant proportion of your debt with a consumer proposal, then you may want to consider filing for personal bankruptcy.

Personal bankruptcy represents a fresh start for people in deep debt.

Unsure which debt-relief option to choose?

Deciding which debt relief option is right for you can feel overwhelming, but we are here to help.

Get in touch with us today for confidential debt relief advice and for more information about the options that are available to you.

Call us for free on (877) 879-4770 to speak with a licenced trustee or email us by clicking here.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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