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How to reduce your debts without going bankrupt


The weight of your debts weighs heavily on your shoulders?
With a good dose of organization and review of your consumption habits, it is possible to escape and avoid personal bankruptcy.
Know you're not alone, in 2016, the debt ratio of Canadian households reached a record 168%. The first step is to face the reality and to take charge today.
Here are some practical tips and solutions to escape bankruptcy.

Have a game plan: budget and debt classification
 A budget is the compass that will allow you to return to the path of financial health. If you are not skilled with Excel spreadsheets, some applications might make it easier.
The worst debts are those with high interest rates like credit cards. For example, if you have a credit card balance of $ 1000 at a rate of 20% and a credit balance of $ 1500 at 10%, it is best to pay the card first even if your balance is less than . Sometimes it's the smallest debts that cost you the most!
However, it remains important to make all your monthly minimum payments. A common mistake is to apply a large repayment on one debt and to neglect the minimum payment required of another.
Do not play hiding with your creditors if they try to communicate with you. Call them if you think you can not meet your obligations. Some institutions may be lenient or allow delays without affecting your credit history.

Debt consolidation
This option may still be available if you have maintained good payment habits and a credit rating above the thresholds required by lenders. It consists of consolidating all your consumer debts into one single loan at a rate usually between 8% and 15%. In addition to simplifying the management of your budget, your interest should normally decrease.
However, the lending institution usually asks that you keep only one card or line of credit. Since your consolidation aims to get you out of debt, it is desirable to have more restricted access to credit to stop the bleeding.

Increase your income
Of course, it's easier said than done. But it is recalled that getting out of debt inevitably requires sacrifices, whether it is to take a second job or to dispose of material goods.
With the sharing economy like Airbnb it is also possible to release a second income.
Avoid accumulating amounts in very low rate savings accounts while a large credit card debt is climbing up the other side. This savings comes to cost you money!
Note, however, that everything depends on your particular situation and the tax implications.

Consumer proposal
By going through a trustee, you can offer creditors a final settlement lower than the total debt. If the majority of them agree, it also has the advantage of curbing interest costs and protecting your assets. The consequences may be less than those of a bankruptcy, it remains however that it will become difficult to have access to credit for a period of time.

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