3 Strategies to Become Debt-Free Without Resorting to Bankruptcy

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It can be stressful knowing that you have large amounts of debt. The thought that it could take you decades to pay it off or that your creditors could start taking legal actions against you to collect is enough to keep you awake at night.

Choosing the right strategy to become debt-free depends on your financial circumstances. You have to take into account factors such as:

  • The total amount that you owe.
  • Your income.
  • Your fixed expenses and areas where you can and can’t cut costs.
  • Your assets.
  • The type of debts that you owe.

Keeping that in mind, these are five of the most effective strategies for getting out of debt.

#1 Debt Relief with a Consumer Proposal

A consumer proposal is a form of debt relief designed to forgive a formidable percentage of your total debts and give you a clear path to getting out of debt.

It starts with a consultation with a Licensed Insolvency Trustee. They will go through your debts, income, and expenses and help you find an appropriate debt strategy. If you are eligible, they may be able to file a consumer proposal for you.

In a consumer proposal, you make a single monthly payment to the trustee, who distributes it to individual creditors. The trustee looks at your finances to find out how much you can afford to pay each month and uses this number to calculate how much you can reasonably repay your creditors.

With a consumer proposal, you don’t pay interest on your debts anymore, and you’re protected from legal actions that can be taken to collect from you.

#2 The Snowball Method of Paying Back Debt

Debt relief may not be right for everyone. If you’ve been able to stay on top of debt payments, paying it back on your own might be the right path. Consumer proposals will have a temporary negative impact on your credit score, although paying debt back on your own should improve it.

The snowball method of paying back debt is all about psychology and motivation. It can help make your debt feel more manageable.


Using this method, you focus all of your efforts and money on paying off your smallest debt first, whether it’s a credit card or an overdue utility, while making minimum payments on everything else. As your debts shrink in number, tackling everything can feel more manageable.

#3 The Avalanche Method

The avalanche method is another way of handling debt. It’s less about motivating yourself and more about finding the optimal way out of debt. When you use the avalanche method, the first debt you pay off is the one that charges the most interest.

Interest rates make debts more expensive with time, so paying off the debt with the highest interest first will save you the most money in the long run. It’s the smartest way to pay back debt on your own. The biggest challenge is that it can take longer to pay off your most expensive debt, and you still have to keep up with minimum payments on other debts.

The right strategy for you depends on your financial situation and your relationship with money. These three methods can help.