Options for Debt Forgiveness in Canada

Exploring Your Choices for Debt Forgiveness in Canada

If you find yourself burdened with debts and are exploring options for relief, it’s important to learn about your options for debt forgiveness in Canada. This article will guide you through the various routes you can take to find financial respite and start afresh. Bear in mind that there are only two legally recognized solutions in Canada: a Consumer Proposal or filing for Bankruptcy.

Understanding the Legal Framework for Debt Forgiveness in Canada

In your quest for debt relief, it’s crucial to understand that only two methods can legally free you from your debt obligations in Canada. These are Consumer Proposal and Bankruptcy.

Beware of Misleading Advertisements

While navigating the debt relief landscape, it’s easy to fall prey to deceptive advertisements and misleading claims. It’s important to note that:


There are no government-affiliated or supported debt repayment plans or programs. Any organization claiming to be part of a government program is likely misrepresenting itself.

The only government-regulated options for debt relief are those administered exclusively by Licensed Insolvency Trustees, namely: Consumer Proposals, Division I Proposals, and Bankruptcy.

The Role of Licensed Insolvency Trustees

The role of a Licensed Insolvency Trustee is pivotal in your journey towards debt relief. They are the only professionals who can offer you legal protection from creditors and prevent them from pursuing you for the money owed. To verify whether you’re dealing with an authentic debt relief professional, simply ask, “Are you a Licensed Insolvency Trustee?”.

Debt Settlement Companies – Approach with Vigilance

Debt settlement companies offer to negotiate with your creditors for a fee and typically propose a lump sum payment to clear your debt for less than what you owe. However, beware of the pitfalls associated with this approach:


It’s an unregulated industry, and hence, there’s a risk of escalating creditor collection, high fees, and more.

Any claim about quickly boosting your credit score is misleading; improving your credit score is a gradual process.

Get more insights on Debt Settlement Agents and Credit Counsellors

Eligibility Criteria for Debt Relief and Forgiveness

The good news is that debt relief solutions are not exclusive, nor do you need a referral to gain access. You can directly connect with a Licensed Insolvency Trustee anytime to discuss your situation and options.

The eligibility criteria for accessing legal debt solutions are minimal. You only need to owe at least $1,000 and be unable to repay all your debts as they become due. You and your Licensed Insolvency Trustee will work together to determine which option makes the most sense for your situation.

The Route to Personal Bankruptcy – A Path to Debt Relief and Forgiveness

Bankruptcy is a legal procedure that provides debt relief and, in many instances, complete debt forgiveness. While the idea of bankruptcy might initially sound intimidating, it’s typically a private and straightforward process for most Canadians.

Understanding Bankruptcy

Here’s how bankruptcy works in Canada:


It allows you to get forgiveness for various types of debts, protect assets and income vulnerable to seizure by creditors, and stop the stress from never-ending balances or overwhelming payments.

Most bankruptcies in Canada are voluntary, meaning the debtor initiates the process to deal with their debt.

To declare personal bankruptcy, you need to work with a Licensed Insolvency Trustee. They are the only professionals authorized to administer this process.

Steps to Declaring Bankruptcy in Canada


  1. Connect with a Licensed Insolvency Trustee in your province for a confidential consultation and assessment of your situation.
  2. Complete the intake forms and sign the official personal bankruptcy documents that your Licensed Insolvency Trustee prepares.
  3. Fulfill your duties during the bankruptcy process, which typically lasts for nine months from the date of signing until you are discharged (released).
  4. Upon completion of your personal bankruptcy (usually at the nine-month mark), you will have achieved full and final settlement/forgiveness of your debts.

Consumer Proposal – A Combination of Debt Consolidation and Forgiveness

A Consumer Proposal is not bankruptcy. It’s a unique legal debt solution with significant advantages over traditional consolidation loan options and credit counseling programs. A Consumer Proposal allows you to consolidate all your debts, stop all future interest charges, and repay a portion of the debt in full satisfaction of amounts owed.

Understanding Consumer Proposals

Working with a Licensed Insolvency Trustee, you offer to repay only the portion of the total debt that you can afford. The unpaid balance of your debt is then forgiven by your creditors. Here’s an example:


A person who owes $20,000 offers a Consumer Proposal to repay 30% of this total amount owing by way of monthly payments of roughly $165 for 36 months.

Once the Consumer Proposal officially begins, creditors will stop collecting their individual payments, and at the end of the Consumer Proposal, the unpaid balance (70% of the total debt) is forgiven.

Benefits of Choosing a Consumer Proposal

Opting for a Consumer Proposal for debt consolidation and partial debt forgiveness offers several benefits:


  • It allows you to consolidate virtually all your debt without borrowing.
  • It significantly reduces your total debt to what you can realistically afford to repay.
  • It protects you from your creditors, without declaring bankruptcy.
  • It provides a clear “debt-free” date.

If you believe a Consumer Proposal could work for you, you just need to connect with a Licensed Insolvency Trustee. They can help you assess whether a Consumer Proposal is suitable for you and estimate a potential Consumer Proposal for you at no cost.


Understanding and exploring your options for debt forgiveness in Canada can feel overwhelming. Remember, professional debt consultants are here to offer solutions, support, and a way forward, without judgment.

Learn more about debt forgiveness or get started with your debt-free plan.

Book your free confidential debt consultation.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.