How to Get Debt Forgiveness in Canada

Debt Forgiveness in Canada: Everything You Need To Know

Many Canadians struggle with debt.

In fact, the average Canadian household is over $20,000 in the red without even taking mortgage debt into consideration.

As the cost of living continues to rise, yet wages seem to stagnate, many Canadians simply aren’t able to save or budget in ways that are conducive to being debt free.

As such, when unforeseen costs arise their only option is to pile one debt on top of another.

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Over time, debts can spiral out of control and more and more of the householders’ income is lost to interest payments.

Indeed, did you know that 7.3% of the average Canadian household income is lost to interest alone?

Over time, debt can become crippling to your household finances.

But did you know that, rather than arranging a standard repayment plan you may be able to get some or all of your debts forgiven?

Here we’ll look at some of the Debt Forgiveness options that may be applicable to your household debts…

What is Debt Forgiveness?

Debt Forgiveness is an umbrella term that applies to a number of debt relief solutions.

Debt Forgiveness entails your creditors writing off part or all of your debt under a new arrangement to which your creditors either agree, agree in majority or are legally bound by a Bankruptcy Court.

Do I qualify for Debt Forgiveness?

Debt Forgiveness is designed for households whose debts have spiralled out of control to the point where they cannot be managed by budgeting alone.

If these circumstances apply to you, there’s a good chance that you’d be a candidate for Debt Forgiveness:


  • You’re struggling to even make the minimum monthly repayments on your debts;
  • You consistently have to add to your debt balance to pay the bills;
  • You have to miss payments or borrow high-interest short term loans to meet your commitments to your debts;
  • You have applied for a Debt Consolidation Loan but been turned down.


If any (or all) of the above apply to you, you may be insolvent and thus unable to realistically pay off your debts the way things currently stand.

You should speak to a Licensed Insolvency Trustee.

These people are unlike non-profit Debt Counsellors in that they are able to show you all of the options available to you.

Once you have made an informed decision as to which one best suits your needs, only they can help to facilitate it.

Click Here to find a Trustee near you.

What Debt Forgiveness options are available?

There are several Debt Forgiveness programs which will allow you to significantly reduce (or in some cases write off completely) the principal debt owed.

Let’s take a closer look…

Debt Management Plans

Technically, a Debt Management Plan is not a Debt Forgiveness option, because the principal still needs to be repaid in full.

However, it is one of the easiest options and most creditors are amenable to it.

What’s more, it doesn’t stay on your credit report for as long as other options available.

If you have been turned down for a Debt Consolidation Loan, a Debt Management Plan may allow you to do something similar.

It combines all outstanding debts into a single, manageable payment and interest is significantly reduced.

In some cases, interest can be frozen altogether.

However, it’s important to note that Debt Management Plans are not legally binding and are entered into voluntarily by your creditors.

A Debt Management Plan will stay on your credit record for 2-3 years after it has been completed.

Consumer Proposals

A Consumer Proposal is an alternative to Bankruptcy in that it forgives much of your principal debt (up to 80%) and puts an instant freeze on interest and any other charges.

While your debts still have to be repaid, a Consumer Proposal can make your debts significantly more manageable and you could be debt free in as little as 3-5 years.

Your Insolvency Trustee will act as a Proposal Administrator.

They will take a close look at your financial circumstances and help to compose a proposal which will be mutually beneficial.

They will then put this to your creditors.

If a 51% majority of them vote in favour of your proposal, all of them are bound by its terms, whether they agreed to them or not.

A Consumer Proposal will typically stay on your credit record for up to 3 years after it has been paid off.

Click Here to see some of the further benefits of a Consumer Proposal.

Personal Bankruptcy

Finally, a Personal Bankruptcy can forgive the majority of your debts, or even all of them.

That’s not to say that there aren’t costs associated with filing for Bankruptcy, nor is it to say that there aren’t consequences.

Bankruptcy is a serious arrangement and not one that should be entered into lightly.

Nonetheless, it can help you to be debt free quickly and learn the skills necessary to get better at budgeting and saving so that you don’t need to rely on credit any more.

As long as you meet all of your obligations within the first 9 months of Bankruptcy your debts will be automatically discharged and you will no longer have to contend with your creditors.

You’ll be able to take back control of your finances and enjoy having disposable income again.

A Bankrupcy will remain on your credit record for 6 years if it is your first or 15 years if you have been declared bankrupt before.

We can help you find the right Debt Forgiveness solution for you!

If your debts have spiralled out of your control, we can help you to find the right Debt Forgiveness solution for your needs.

We can furnish you with the information you need to make an informed choice and put you in touch with a Licensed Insolvency Trustee to put your debt relief plan into action.

For more information, call us today on (877)879-4770 to arrange a risk-free, zero-obligation and 100% confidential callback.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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