There is No Debtor Prison

Dealing with financial obligations can be challenging, especially when faced with the threat of incarceration due to unpaid debts. In Canada, the fear of a debtor’s prison is a common misconception that instills fear and stress in those struggling with debt. However, the reality is, there is no debtor prison in Canada. This article aims to dispel this widespread myth, provide information on the legal rights of debtors, and offer solutions to manage and overcome debt effectively.

The Myth of Debtor’s Prison

The concept of a debtor’s prison is not unfamiliar. Harking back to the mid-19th century, debtor’s prisons were institutions where individuals unable to pay a court-ordered judgement were incarcerated. The prisoners had to work off their debt via labour or procure external funds to pay the balance. Their labour contributed towards their incarceration costs and the accumulated debt.

However, the debtor’s prison, as a tangible entity, has been extinct since the mid-19th century. So, contrary to the distressing phone calls from collection agencies or scammers impersonating the Canada Revenue Agency, you cannot be jailed for not making debt payments in Canada unless associated with tax evasion or fraudulent activities.

Modern Day Metaphorical Prison

Although there is no physical debtor’s prison in the present day, a metaphorical one does exist. This is a situation where individuals feel trapped by their accumulating debt, leading to a sense of imprisonment. This perceived confinement stems from the vicious cycle of making minimum payments that barely cover the interest, leaving the principal amount largely untouched. Such individuals often feel they cannot live life on their terms due to their debt obligations. This metaphorical confinement is known as the modern-day debtor’s prison.

Breaking Free from the Debt Prison

If you feel imprisoned by your debts, the crucial step is to eliminate those debts to start anew. It may seem like a daunting task, but there are professional services available to help. A Licensed Insolvency Trustee can assist in eliminating debts either through a Consumer Proposal or Bankruptcy Filing, depending on your financial situation.

Consumer Proposal: An Overview

A Consumer Proposal, approved by the Government of Canada, allows an individual to propose to their creditors to pay back a part of the debt they owe. This method of debt consolidation must be filed via a Licensed Insolvency Trustee. Upon completion of a Consumer Proposal, most unsecured debts are typically eliminated.

Bankruptcy: What it Entails

A Bankruptcy provides protection from your creditors in Canada. It’s a federally regulated process designed to provide a fresh start to individuals struggling with debt. Like a Consumer Proposal, most unsecured debts are typically eliminated upon the completion of bankruptcy.

Budgeting: The Key to Avoid Debtor’s Prison

The simplest yet most effective way to avoid falling into the modern-day debtor’s prison is through budgeting. Proper monthly budgeting can prevent the gradual accumulation of debt from living beyond your means. It is a tool that can help one live within their means, thus avoiding the metaphorical prison.

During credit/financial counselling sessions, the importance of monthly budgeting is emphasized. These sessions cover different types of household expenses and provide methods and tips on adjusting budgets to live within one’s means. Links to government-designed financial counselling modules are also provided, which are flexible and allow you to learn at your own pace.

Legal Recourse for Creditors

While debtors needn’t fear imprisonment, creditors do have certain legal remedies to recover the money owed. They can:

  • Send demand letters or make calls.
  • Sue and get Court Orders to seize bank accounts and/or garnishee wages.
  • Report payment activity to credit reporting agencies like Equifax and Transunion.
  • Engage the services of Collection Agencies or sell accounts to another company for collection.

Circumstances that Could Lead to Jail

While failure to pay debts doesn’t result in jail time, certain legal situations might. These include:

  • Failure to pay court fines as directed by the court.
  • Failure to pay child support and/or alimony.
  • Tax evasion or other fraudulent tax activities.

Finding the Right Debt Solution

Regardless of how complicated or severe your financial situation may seem, there are always options to explore. Debt professionals like Bankruptcy Canada offer free consultations to help find the right debt solution tailored to your financial situation.

Bankruptcy Canada, a group of Licensed Insolvency Trustees, now offers video appointments, making their services available from the comfort of your home.


In conclusion, while the fear of a debtor’s prison can be daunting, it’s essential to remember that there is no debtor prison in Canada. There are numerous professional services and legal protections available to help individuals navigate their way out of debt and avoid the metaphorical debtor’s prison. It is always advisable to seek professional help and explore all possible options to manage and overcome debt effectively.

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.