What are the solutions to get out of debt?

Nowadays, having debts is normal. However, when they take up too much space in our budget and become a source of worry and stress, it’s time to take control and adopt a plan. Debts problems can become very damaging if not taken of in time. Fortunately, there are several solutions to help individuals manage and reduce their debts. Here are some of the main strategies and solutions to indebtedness:

Here are 6 solutions to debt:

  1. Elaborate or review your budget
  2. Negotiate with your creditors
  3. Consolidate your debts
  4. Sell an asset
  5. Make a consumer proposal
  6. Consider bankruptcy as a last resort


1 – Make your budget

A budget will allow you to calculate your net income and inventory personal expenses and payments you must make. It’s the best way to identify those that can be reduced or, even better, eliminated. The goal? Generate a surplus each month and use it to reduce your debts.

To learn more about how to make a budget, read the ABCs of a simple and effective budget. And for personalized and free guidance, contact one of our personal finance professionals.

2 – Negotiation with Creditors

Sometimes it’s possible to negotiate with creditors for lower interest rates or more flexible payment terms. Be frank with them, keep your cool and remain respectful throughout negotiations because, at the end of the day, they have the final say on the offer you make them.

3 – Consolidate your Debts

Debt consolidation involves obtaining a loan from a financial institution to pay off all your creditors at once, except for the mortgage and car loan. The loan is usually spread over a maximum period of 5 years. Unfortunately, the interest rate, between 12% and 15%, is higher than that of an ordinary loan, which is between 8% and 10%. Therefore, you should only consolidate debts with an interest rate higher than 12%, such as credit cards, for example. Subsequently, you will only have one payment to make each month, you will have reduced interest charges, and you will have a schedule to repay your debts within a reasonable time.

4 – Sale of an Asset

Selling a non-essential asset can provide you with additional money to repay your debts or at least allow you to reduce expenses related to that property. A second car that you can do without is an excellent example.

5 – Make a Consumer Proposal

If you cannot afford to obtain or make monthly payments on a consolidation loan, you should consider a consumer proposal. This settlement offer is prepared by a trustee who will determine with you the amount you can offer, without interest. It targets all your unsecured creditors (credit cards, line of credit, personal loan).

A consumer proposal has several advantages:

  • The amount to be repaid is based on your financial ability rather than the amount of debt.
  • There are no interest charges on the amount to be repaid
  • You will not have to repay 100% of your debts unless your financial capacity allows it.
  • You keep the assets you want to keep and can return to the creditors those you no longer want.
  • You are protected against any wage or asset garnishment.
  • If a majority of creditors accept your offer, the others will automatically have to follow.

6 – Bankruptcy

Many fears and misconceptions are attached to bankruptcy. But when your financial means do not allow you to make a consumer proposal, it can be a quick and low-cost solution to end the debts. The Bankruptcy and Insolvency Act even promotes the financial rehabilitation of the consumer and protects you:

  • RRSPs and pension funds are non-seizable.
  • A mortgage creditor or for a car loan is prohibited from taking back the property if you are not in default under the loan.
  • Discharge is automatic (for a 1st and 2nd bankruptcy) without having to go to court.
  • The duration of bankruptcy is shorter if the income falls below a certain threshold.


Each debt situation is unique, and the best solution will depend on individual circumstances. It may be wise to work with a personal finance advisor like the ones at Jean Fortin to determine the best approach for your situation. Our personal finance advisors are available to answer your questions and explain the advantages and disadvantages of each option.

It’s free, confidential, and without obligation.

A well-informed person is worth two!