Credit Card Debt Relief in Canada

Credit card debt is something that can affect many of us, with the average Canadian’s non-mortgage debt being $31,531. It is easy for credit card debt to spiral, with credit card limit increases and a growing reliance on credit cards.

For some Canadians, it is possible to pay this off on their own, but for many, credit card debt relief is required. There is no shame in seeking help, and it is important to remember that there are many options for gaining credit card debt relief. Below are the primary forms of credit card debt relief available in Canada.

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How can I get out of credit card debt?

If you need credit card debt relief for overdue, unmanageable payments, there are several options available to you to help you gain debt relief. Each of these forms of credit card debt relief is different when it comes to monthly payments and the subsequent effects on your credit report. Equally, each form of debt relief will vary in timeframe, so it is important to consider what is most suitable for your situation. At Spergel, our experienced Licensed Insolvency Trustees will help to advise you on the best form of credit card debt relief for your circumstances.

Here are the primary forms of credit card debt relief in Canada:

  • Paying off credit card debt yourself
  • Credit card debt negotiation
  • Credit card debt consolidation
  • Filing a consumer proposal for credit card debt
  • Filing bankruptcy for credit card debt

Paying off credit card debt yourself

If you believe that your credit card debt could become manageable, it is possible that you could pay back credit card debt by yourself. This can be achieved by having a considered budget and a debt reduction plan. It is crucial to be realistic yet disciplined with yourself in order to assess ways to cut your spending and to channel any money you save into repaying your credit card debt. The key advantage of paying off credit card debt yourself is that it will have the least impact on your credit report.

Credit card debt negotiation

A method of paying back your credit card debt sooner is to attempt a debt negotiation with your credit card providers. It is possible to agree more favourable terms with your creditors, including lower interest rates. This could then mean that your credit card debt is paid back sooner, instead of accruing more debt from the interest rate. You are more likely to have a successful credit card debt negotiation if you are current on your payments, and have a reasonable credit report.

Credit card debt consolidation

Debt consolidation can be a great way to combine your credit card debts, which in turn can reduce your monthly payments. While you will not see an overall reduction in your credit card debt, debt consolidation can make your monthly payments more manageable. Another advantage is that debt consolidation often means you will have a reduction in interest rate to help you pay back the credit card debt sooner and begin rebuilding your credit.

There are a couple of methods of credit card debt consolidation:

Debt management plan

A debt management plan is a payment plan often coordinated by a non-profit credit counsellor. If you have a number of small credit card debts, they will consolidate them for you. Although you will not have a reduction in your overall debt, often you can secure a reduced interest rate. Repayment often takes around three to five years. It is important to note that should you take part in a debt repayment program, a notice will stay on your credit report for two years after repayment.

Debt consolidation loan

A debt consolidation loan is a new loan that is taken out to combine several high interest rate credit card debts into one lower interest rate loan. It is important to note that should you be unable to make your debt consolidation loan payments, there can be penalties. It is possible to use equity in your home or other secured assets to secure a debt consolidation loan. If, however, you cannot make your payments, your home or assets will be at risk.

Filing a consumer proposal for credit card debt

A consumer proposal is a legally backed form of debt relief that falls under the Canadian government’s Bankruptcy and Insolvency Act. It is a formal credit card debt negotiation carried out by a Licensed Insolvency Trustee that results in a debt reduction of up to 80%. You are also able to keep your assets. For serious credit card debts where you may be receiving calls from collection agencies or credit card providers, a consumer proposal automatically generates a stay of proceedings. This means protection from creditors, and stops any wage garnishments or collection calls. For this reason, a consumer proposal is often considered to be the the cheapest and safest form of debt relief. Learn more about Spergel’s consumer proposal reviews.

Filing bankruptcy for credit card debt

Often considered a last resort for debt relief, filing bankruptcy is necessary for some Canadians in order to clear their credit card debt. If you are unable to negotiate with your creditors through a consumer proposal, filing bankruptcy is the best alternative. Bankruptcy is the process of reassigning any non-exempt assets to a Licensed Insolvency Trustee to go towards your debt repayment in exchange for credit card debt clearance. All your credit card debt will be eliminated, and most bankruptcies are discharged after nine months. By this point, you can begin a fresh financial start.

Debt Repayment Calculator

Reduce your debt by up to 80%

At Spergel, we have helped Canadians begin a fresh financial future for over 30 years, and we are here to help you too.

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Paying off credit card debt yourself Credit card debt negotiation Credit card debt consolidation Consumer proposal Bankruptcy
What is it? Budgeting and making a debt reduction plan to pay back credit card debt yourself Negotiating with your credit card providers to try and secure a more favourable interest rate Gaining more manageable monthly payments through either a debt management plan or a debt consolidation loan Settling your debts formally through a Licensed Insolvency Trustee who negotiates with your creditors to reduce your debts Legally clearing your debts by assigning your non-exempt assets to a Licensed Insolvency Trustee in exchange for debt clearance
  • Lowest impact on your credit report
  • Possible to gain a better interest rate and repay credit card debts sooner
  • One manageable monthly payment
  • Often a reduction in interest rate
  • Can reduce your credit card debt by up to 80%
  • Keep your assets
  • One manageable monthly payment
  • Protection from creditors
  • Clearance from debts
  • Protection from creditors
  • Requires discipline and commitment to repay your credit card debts
  • No guarantee that negotiation with creditors will work
  • No reduction in overall credit card debt
  • Impacts your credit report
  • Impacts your credit report
  • Must surrender non-exempt assets

Book a free consultation

For advice on credit card debt and your journey to debt relief, book a free consultation with one of our Licensed Insolvency Trustees. With credit card debt, it is best to address the problem sooner rather than later. At Spergel, you will be assigned your own trustee to walk you through your options on the journey to credit card debt relief. You owe it to yourself.

How to free yourself of credit card debt

Janet couldn’t juggle anymore. For years she had been paying one credit card with another whenever she would get into financial trouble. Carrying large balances and paying a lot of interest was causing unnecessary stress. Janet needed one monthly payment and to see her balances going down – not up. We helped her with a consumer proposal, one affordable monthly payment with all credit card debt included. Now Janet is debt-free, juggling family events like soccer practice and dance recitals instead.

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