When you are drowning in debt, you might want to seek debt forgiveness to reduce your debts and start over.

Fortunately, there are ways to achieve debt forgiveness in Canada that allow you to write off a portion of your debt. We’ll look at each Canadian debt forgiveness program in detail so you can decide which one is best for you.

What is debt forgiveness?

Debt forgiveness means that your creditors agree to write off the debt you owe them. This usually happens through a debt relief program when you can’t afford to repay your debts.

Typically, most unsecured debts, such as credit cards, loans, lines of credit and utility bills, can be forgiven. Student loan debt can be forgiven under certain circumstances, and even CRA debt forgiveness is possible.

Is there a Canadian debt forgiveness program?

While the Canadian Government doesn’t directly offer a debt forgiveness program, there are two formal, legally binding debt solutions that offer debt forgiveness: bankruptcy and a consumer proposal.

Two formal debt forgiveness programs in Canada: bankruptcy and a consumer proposal.

After completion, your debts are discharged, and you are no longer legally obligated to repay your debts.

A consumer proposal is the most popular government-approved debt relief program because it allows you to write off a portion of what you owe without declaring bankruptcy.

A consumer proposal lets you reduce your debt by up to 80%.

Bankruptcies and consumer proposals are regulated by the government and can only be administered by a Licensed Insolvency Trustee.

A trustee is the only person who can provide protection from creditors to stop collection calls, wage garnishments and legal action. No other debt professional or debt relief solution can offer this protection.

Licensed Insolvency Trustees can stop collection calls, lift wage garnishments, end all legal action and freeze interest on debts.

Many companies advertise government debt forgiveness programs, but many are unlicensed and unregulated. Be aware of debt relief scams and get free advice from a Licensed Insolvency Trustee.

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Debt forgiveness Canada: your options

It’s true that there are only two ways to get debt forgiveness in Canada: through a consumer proposal or bankruptcy. But other debt relief programs can help you eliminate your debts.

Below are the most popular debt relief options.

Consumer proposal

In Canada, a consumer proposal is the only legal way to reduce your total debt without filing for bankruptcy. It’s an agreement to pay back some of your debt to your creditors, with the remaining amount forgiven.

Typically, you make affordable monthly payments over an agreed amount of time, up to 60 months. Payments are interest free, debt collection agencies stop calling, and wage garnishments are lifted.

You keep all your assets, but your credit score will drop. However, once you have completed your proposal, you will be debt free, and you can rebuild your credit faster.

Consumer proposal cost

A consumer proposal is a safe and affordable way to get back on track when you have a regular income but are struggling to make payments on time.


While often a last resort, filing for bankruptcy can be a good option for resolving unmanageable debt that you cannot pay, usually resulting from a life change such as divorce, unemployment or ill-health.

You give up some of your assets in exchange for assistance with your debts, and your credit score will drop. But all your unsecured debts are forgiven upon completion, and you can repair your credit without the burden of debt.

By taking action to stop the rot, you can stop collection action and be debt free within 9 to 21 months.

Debt management plan

Non-profit credit counselling services can help you resolve your debt problems through a debt management plan (or debt management program). This is an informal proposal that a credit counsellor makes to your creditors on your behalf.

You cannot seek debt forgiveness in a debt management plan. Although you cannot write off debt, you can often reduce interest which can save you money. You consolidate all of your debt into one single monthly payment.

Your credit score will decrease if you enter a debt management plan, but paying off your debts on time will help your credit in the long term.

Debt settlement

When it comes to debt settlement, there are two routes: doing it yourself or using a debt settlement company.

You could try negotiating with creditors yourself for a debt reduction or lower interest rate, but it’s unlikely they will agree. Most will insist that you enter into a consumer proposal because it is a legally binding agreement.

Debt collectors are different: they are sometimes willing to accept a lower lump sum to settle the debt.

Debt settlement companies negotiate with your creditors on your behalf. As it is an informal agreement, creditors aren’t required to negotiate with a debt settlement company, and there is no guarantee of debt forgiveness.

You must pay a lump sum to settle your debt and often pay a large fee. Late payments impact your credit score while a debt settlement company negotiates with your creditors.

Beware of debt settlement scams in Canada

Debt settlement is an unregulated industry which generally should be avoided. The safest way to negotiate debt reduction is through a Licensed Insolvency Trustee.

Debt consolidation

A debt consolidation loan allows you to combine multiple debts and make one monthly payment. This can lower your interest rate and make your payments more manageable, but your debt cannot be forgiven.

If you have credit card debt and multiple payday loans, you might benefit from consolidating these debts to decrease the interest rate.

If you’re struggling with debt but are still making payments, debt consolidation could help. However, you’ll need a stable income and a good credit score.

Types of debt consolidation in Canada

Is there a CRA debt forgiveness program?

There is no such thing as CRA debt forgiveness, but you can include CRA debts in a consumer proposal and possibly reduce your overall debt if a majority of creditors agree.

Out of all the debt relief solutions out there, the CRA will only consider a consumer proposal or bankruptcy.

If you enter into a proposal, they may attach conditions, such as a clause to file and pay future taxes on time.

Is there student debt forgiveness in Canada?

In Canada, student loans can be included in a consumer proposal or bankruptcy if it has been seven years since you completed your studies.

Sometimes, a student loan can be discharged after five years under a hardship provision. Before agreeing to student debt forgiveness, the court will consider various factors to determine whether you acted in good faith in repaying the debt.

Child support and alimony debts

Unpaid alimony or child support are debts that cannot be forgiven under any circumstances.

How do I qualify for Canada debt forgiveness?

Dealing with debt can be stressful, cause anxiety and lead to poor health. But often, debt can seem scarier than it is, and there are debt solutions to give you some breathing room to recover and start again.

If you want to learn more about debt forgiveness programs in Canada, it’s free to talk to an experienced Licensed Insolvency Trustee in your area.

Get debt relief

Free consultation with a Licensed Insolvency Trustee by video, phone or in person.

  • Experienced trustees
  • Local offices
  • Personalized plan
  • No fees
Get started

It only takes 30 seconds.

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