We all know the most common advice for paying down credit card debt: pay it on time and in full every month. However, according to Bankruptcy Canada, only 25 percent of Canadians actually manage to do this. The rest carry a balance, and when that balance becomes overwhelming, some resort to extreme measures to pay off the debt. Here are three drastic methods people have used to eliminate their debts and what we can learn from their unconventional tactics.
1. Liquidate Everything but the Essentials
A few years ago, Geoffrey Westlock of Calgary, Alberta, found himself $85,347.27 in debt, including over $17,000 in credit card debt. Despite having a stable job, Westlock faced cash flow issues after finishing film school, leading him to rely heavily on credit cards. Though he managed to pay his bills, he could only afford the minimum payments, never making a dent in the principal.
In December 2013, with the possibility of his boss selling the business looming over him, Westlock realized he needed to take drastic action. He decided to radically downsize his lifestyle. He moved out of his rented townhouse, sold all non-essential possessions, put the rest in storage, and lived in a camper on his truck. He parked near his workplace during the week and in a Walmart parking lot on weekends.
Westlock also started a blog called The Urban Nomads to share his experiences and hold himself accountable. By freeing up money through his new minimalist lifestyle, he tackled his highest-interest debts first and then moved on to the next highest until he paid off the entire $85,000 by October 2017.
His advice for those looking to get out of debt: “Don’t be afraid to fail. Understand that you’re going to make mistakes, but don’t let them stop you. Fix what needs fixing and keep moving toward your goal.”
2. Eat on $1.00 a Day
During the global recession, Kerri Leonard and her then-boyfriend Christopher Greenslate were spending $100 a week on food. With car payments, a mortgage, and credit card bills piling up, they knew they needed to make some changes. Inspired by the fact that about a billion people live on a dollar a day, they decided to try the same.
In September 2008, they followed an old book called Eating Well on a Dollar a Day and chronicled their journey on a blog that eventually turned into a book, On a Dollar a Day: One Couple’s Unlikely Adventures in Eating in America. They bought staples like rice, peanut butter, and yeast to make their own bread and meticulously priced out their meals.
Although they saved money and lost weight, the diet was neither healthy nor sustainable. Leonard advises against replicating their experiment, noting that it was dangerous and took a toll on their health and energy.
However, the experience taught them to be more thoughtful about their purchases. Leonard reflects, “It made me more conscious of my spending in all areas, not just food.”
3. Declare Bankruptcy
Declaring bankruptcy is the final and most drastic measure to get out of debt when all else fails. According to Tim Geary, leader of the consumer insolvency practice at Fuller Landau Debt Solutions in Toronto, the bankruptcy process takes about nine months, and a record of the bankruptcy remains on your credit report for seven years.
While this means you won’t be able to get a mortgage, car loan, or unsecured credit for a long time, there is a silver lining. People with regular income can often obtain credit faster than seven years post-bankruptcy, and it allows them to move on from their debt.
Initiating bankruptcy also halts calls from creditors and stops court orders to seize assets or garnish wages. “We can’t get the money back that’s already been taken, but it will stop future wage garnishes, which makes bankruptcy the final release valve when it comes to overcoming your debt,” says Geary.
Conclusion
While these extreme methods can provide a path out of debt, they come with significant challenges and risks. Liquidating assets, living on a dollar a day, and declaring bankruptcy are not decisions to be made lightly. However, they highlight the importance of taking decisive action, planning carefully, and being willing to make sacrifices to achieve financial freedom.
