Tips and tricks to pay off your debts

2023-11-01  3 minute read

Michelle Scheller

Lifestyle Debt

Make your debt-free future a reality with some useful strategies to pay off what you owe.

In addition to the pressure it has put on everyday household expenses across Canada, increasing interest rates have also been making the cost of debt more expensive.

Thankfully, on October 25, the Bank of Canada announced they did not further increase the interest rate, but consumers are still combatting the inflationary pressure impacting personal finances across the board.

For most Canadians, income has not increased at the same rate of inflation, putting stress on household budgets and due to inflation, even if you make no changes to your lifestyle or everyday purchases, the amount you spend will be higher.

Couple budgeting planning with a laptop.

Based on the recent MNP Consumer Debt Index, more that half of Canadians, 51 percent, report that they are $200 or less away from not being able to meet their monthly financial obligations. Despite efforts to spend more cautiously, expenditures on essentials have increased and half of households remain on the brink of insolvency.

Cutting your spending and saving more may seem like obvious ways to decrease your financial stress but they’re not always realistic for everyone. Here are some other ideas that may help to ease the financial burden:

  1. Review your budget: This comes up repeatedly, but it has never been more important to review your budget on a regular basis. Lifestyles, income, and family situations can change and often, these will have an impact on your budget. Looking at ways to reduce your household expenses should be an ongoing task. Are you paying for a streaming service you don’t watch or listen to? Do you eat out more than you eat at home? Are you picking up coffee every day on the way to work? Consider buying less expensive grocery items, review your utility expenses, and evaluate your spending to determine where you can cut back. Small changes may not seem significant right away but they can have a big impact over time.
  2. Set up an emergency fund: Unexpected expenses seem to crop up at the most inopportune times. Having an emergency fund is key to help mitigate the impact that these situations can have on your finances both in the short- and long-term. Just as small changes in your spending make a difference over time, so too will small monthly deposits to your emergency fund.
  3. Consider looking for additional work: While this may not be feasible in all situations, if needed, do you have the ability to earn additional income, for example, could you drive for Uber, Lyft, or a food delivery service? What about pet sitting, or childcare/ babysitting for close friends or family?
  4. Review your debt products: If you have high interest credit cards, talk to your bank to see if you can refinance to a lower interest debt product such as a line of credit or fixed rate term loan. Depending on your situation, there are options to pay down your debts more effectively and efficiently.
  5. Negotiate with your creditors: Contact your creditors to see if they would be willing to reduce the interest rate.
  6. Debt avalanche: If you have multiple debt products, in addition to the minimum payments on each of them, focus on the highest interest one and make larger payments to that one to get it paid off sooner. Once paid off, target the next high interest debt and continue to do the same until you have paid off all your debts.
  7. Consolidate your debt: If you do have multiple debt products, you may be able to consolidate them into one with a lower interest rate.

Bankruptcy and Consumer Proposal

If your debts have reached overwhelming and unattainable levels, a Bankruptcy or Consumer Proposal might be the best option for you.


If you have had your wages garnished, are unable to make credit card or loan payments on time or are receiving past due notices and calls from debt collectors, Bankruptcy might be the best option for you.

To declare Bankruptcy, set up a consultation with a Licensed Insolvency Trustee (LIT) who will manage your application paperwork, inform your credits, and stop wage garnishments.

Your Bankruptcy process can last anywhere from nine to 21 months. During that period of time, you’ll file monthly income and expense reports, attend two financial counselling sessions, provide your LIT with all relevant tax filing information, and make any required payments.

Every Bankruptcy will look different depending on your income, expenses, and assets. It’s important to speak with an LIT to determine if Bankruptcy is the right solution for you.

Consumer Proposal

Like a Bankruptcy, a Consumer Proposal is a legal process that helps you get out of debt over a set period of time.

Consumer Proposals look at unsecured debts such as credit cards, personal or payday loans, student loans, and income tax debt. If your total debt is less than $250,000, excluding the mortgage on your principal residence, and you want to keep assets that may not be protected in a Bankruptcy, Consumer Proposal might be the right option for you.

To file a Consumer Proposal, first, set up a call with an LIT who you will work with throughout the process. Once you’ve prepared your proposal together, your LIT will present it to your creditors for review and approval.

You will set up a payment plan with your creditors and must attend two financial counselling sessions. ­­Depending on the proposal you submit, your Consumer Proposal cannot last more than five years.

Debt can be scary and overwhelming but with a balanced budget and a few solid financial management tips, you can work your way out of the burden of debt and look towards a debt-free future.

To learn more about the options available to you, visit our website and contact Michelle Scheller, Senior Vice President, Insolvency, at [email protected]

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