Are There Federal Government Debt Relief Programs?

Understanding Government Debt Relief Programs in Canada

The question, “Are There Federal Government Debt Relief Programs?” is frequently asked by individuals grappling with debt. To answer succinctly, there are no direct monetary assistance programs from the Canadian federal government to assist consumers in repaying their debt. However, some debt relief options are regulated by the federal government’s Bankruptcy and Insolvency Act (BIA). This article delves into the various alternatives for those who find it challenging to manage their debt.

Federal Government Debt Relief Programs in Canada

Although the Canadian federal government does not directly grant money to consumers to aid in their debt repayment, there are debt forgiveness programs regulated by the federal government’s Bankruptcy and Insolvency Act (BIA). The government-regulated programs include consumer proposals and bankruptcies.

Consumer Proposal

A consumer proposal is a legal arrangement between you and your creditors to pay back a fraction of your debt. This government-regulated program is managed by a Licensed Insolvency Trustee (LIT). It often results in a significant reduction in the overall debt by making debt payments more manageable or by reducing interest costs. This option is available to you if your debts — excluding your mortgage — do not exceed $250,000. A consumer proposal grants protection from creditors and debt collectors, as well as halts any wage garnishments and debt interest accumulation as soon as you file.


Bankruptcy is a legal process that offers debt relief to those who have no other plausible way of getting out of debt. Similar to a consumer proposal, a bankruptcy proceeding is managed by an LIT. As part of your obligations, you’ll be required to attend two credit counselling sessions and file monthly income and expense reports. Depending on your circumstances, you can be discharged from bankruptcy as quickly as 9 months. Bankruptcy is best suited for those with very high debt exceeding $250,000, not including mortgages.

Government Debt Relief Programs for Student Loans in Canada

Paying for post-secondary education can be extremely expensive in Canada. To help offset these financial barriers, several provinces offer some form of debt relief for student loans.

Student Loan Forgiveness for Medical Students

The Canadian government offers loan forgiveness to medical students enrolled in studies to become nurses, doctors, and other types of medical professionals. Loan forgiveness can only be applied to the federal portion of a student loan and not the provincial or territorial portion.

Provincial Government Debt Relief Programs for Student Loans

Various provinces across Canada offer provincial student loan forgiveness programs. These include the BC Loan Forgiveness Program, the Quebec Loan Remission Program, the PEI Debt Reduction Program, and the Nova Scotia Student Loan Forgiveness Program.

Other Debt Relief Options

Here are some alternative debt relief options to consider before filing for bankruptcy. All of these options may have different impacts on your credit report and credit score, and for various durations. The best option for you depends on your unique situation and goals.

Debt Consolidation

Debt consolidation is ideal for those with multiple debts. By consolidating all these loans into one low-interest debt consolidation loan, you can save a lot of money on interest. Moreover, managing your debts will become much easier as you only have one to pay.

Debt Management Programs (DMP)

A Debt Management Program (DMP) may be a better option if you cannot qualify for a debt consolidation loan due to a low income or poor credit. A DMP involves working with a credit counselor to consolidate your debts. They work with your creditors to develop a new payment plan, typically between 3 to 5 years long.

Debt Settlement

Debt settlement could be an option if you have a large amount of debt and don’t have a high enough income to get out of it but have some savings to put towards the debt. In a debt settlement, you’ll work closely with your creditors and try to reduce the amount you owe.

Beware of False Advertising

You may come across terms like “government of Canada debt relief grants” or “free Canadian government grants to pay off debt”. While these terms may seem appealing, it’s important to know that they are not entirely accurate. The truth is that while some of these services are regulated or licensed by the government, it doesn’t mean that they are approved by them.


While the government does not provide any direct debt relief for citizens struggling with debts, each province across the country has various debt relief options that can be highly effective in helping you get out of debt. Remember, just because something says it’s “government approved” doesn’t necessarily mean it’s the best option for you. Always conduct thorough research on the various options you come across and see which one best fits your unique situation.

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