How to Reduce Your Debt When You Can’t Repay

Debt can often feel like a weight that continuously puts pressure on your financial freedom. In circumstances where it seems impossible to repay, it’s crucial to find efficient strategies to lessen your debts and regain control of your finances. This article will explore how to reduce your debt when you can’t repay, providing thorough guidance on various methods you can utilize.

Understanding Your Debt

Before embarking on any debt reduction journey, you must first understand the nature of your debt. Consider the type of debt you owe, its interest rate, and the amount. This will provide an essential basis for your debt reduction plan.

Taking Control of Your Finances

When you find yourself unable to keep up with debt repayments, the first step should be to regain control of your financial situation. This could involve:

  • Consolidating high-interest debts into one loan with lower payments
  • Selling assets to repay some of your debt
  • Boosting your income, such as taking a second job or renting out a room

Debt Management Plan (DMP)

A Debt Management Plan can be a viable option for those who can afford to pay back their debt, but need help organizing it. A credit counseling agency will work with your creditors to consolidate your debts into a single, more manageable payment. Although you will still need to pay back the full principal, credit counselors can often reduce or eliminate the interest on your debt.

Consumer Proposal

A Consumer Proposal is a legally binding process where you make an offer to your creditors to pay back a portion of your debt. If a majority of your creditors agree to your proposal, all of them are bound by it. This process can only be administered by a Licensed Insolvency Trustee (LIT), who will consider your income, assets, and expenses when compiling the proposal.


Bankruptcy is a last resort for those who are unable to pay back their debt. This process involves surrendering most of your assets to a trustee in bankruptcy, who sells them to repay your creditors. Bankruptcy will have a significant impact on your credit score and should only be considered after exploring all other options.

Factors to Consider

Choosing the right debt reduction strategy involves considering several factors such as:

  • Your total amount of debt
  • The type of debt
  • Your income, budget, and cash flow
  • Your assets
  • Your personal circumstances

Each of these aspects will influence which debt reduction strategy will be most beneficial for your situation.

Debt Reduction Strategies

Below, we discuss some potential strategies for reducing your debt when you can’t repay.

Debt Management Plan

For $10,000 in Debt

With a $10,000 credit card debt, you may opt for a Debt Management Plan. This means you will still have to pay back the full $10,000, but you will likely avoid any interest charges. Fees for this service vary by credit counseling agency but can be up to 10% of your total debt.

For $50,000 in Debt

For larger debts, such as $50,000, a Debt Management Plan may be more beneficial. While you will still need to repay the full amount, you will save on interest charges. However, fees for this service may be higher due to the larger debt amount.

Consumer Proposal

For $10,000 in Debt

With a $10,000 unsecured debt and an annual income of $34,000, you may be able to repay just $6,000 through a consumer proposal. This would be a monthly payment of $100 over a five-year period.

For $50,000 in Debt

For a larger debt amount, such as $50,000, you may be able to repay just $18,000 through a consumer proposal. This would work out to a monthly payment of $300 over five years.


Bankruptcy should be considered as a last resort, only when all other options have been explored and deemed unfeasible. The process involves surrendering most assets to a trustee in bankruptcy, who then sells them to repay your creditors.


Dealing with debt can be overwhelming, especially when it seems impossible to repay. However, by understanding your debt, exploring various debt reduction strategies, and seeking professional advice, you can regain control of your finances and work towards a debt-free future. Always remember, there’s no one-size-fits-all solution when it comes to debt reduction. What works best for you will depend on your personal circumstances, the nature of your debts, and your long-term financial goals.

Find Your Personal Debt Relief Solution

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