Free Canadian government grants to pay off debt: do they exist?

Posted on 1 May 2024

Written by Jeff Adiken

Many Canadians find themselves in a position where they are struggling with unmanageable debt. This is often due to credit card debt or payday loans, which can easily mount up. In situations like this, it can be difficult to know what to do next or where to turn. Some individuals attempt to solve their debt on their own, while others may require professional expertise from a Licensed Insolvency Trustee. In many cases, this is where people look to first see if there are free Canadian government grants to pay off debt. But do they exist? And if not, how do you go about finding a reduction in your debt? In this article, we walk you through the possibilities when it comes to free Canadian government grants to pay off debt, and other forms of debt relief.

What free Canadian government grants are out there?

In Canada, the government does not specifically offer free grants to debtors. There are, however, some debt relief services and programs that must be licensed by the government in order to function. This means that the Canadian government feeds into the regulations of these services, as well as monitoring the associated fees. While the government does not run its own credit counselling services, they will sometimes refer individuals to independent services. Any Canadian government loans and grants that you may see advertised do not come directly from the government, but function under government rules to provide loans and grants for debtors. It is important to stay wary of scams, or companies that may be offering funds they claim are from the government. If they claim to be ‘government approved’, they could well be misleading you. Just because they may offer services regulated by the government, it does not mean that they are approved by the government or any more prestigious than any other debt relief firm.

How else can I get a reduction in debt?

While it may not be possible to get free Canadian government grants to pay off debt, there are other forms of debt reduction out there. In fact, there is a form of debt relief for everyone, no matter what your financial situation. A reputable Licensed Insolvency Trustee can help you to figure out the best form of debt relief for you. Below is a summary of the primary ways of gaining debt relief in Canada.

Debt consolidation

Despite there being a lack of free Canadian government grants, debt consolidation loans can be a simple way to combine debts and reduce your overall debt by cutting interest rates. It is perfect for those with multiple debts from different sources, for instance, credit card debts. Debt consolidation in Canada works by simplifying multiple different debts and consolidating credit to lower monthly payments. In most cases, your debt is reduced because it is likely that a new consolidation loan will offer a lower interest rate overall, allowing you to pay back less. It is often best to seek financial advise from an experienced Licensed Insolvency Trustee in order to understand the best option for your debts.

Credit counselling

Should your financial situation not qualify for a debt consolidation loan, credit counselling could help you to reduce your debt. Although it does not provide a free Canadian government grant, it is typically free debt advice most often from a not-for-profit organization or independent professional or firm. You will be partnered with a qualified creditor counsellor or Licensed Insolvency Trustee who will advise you as to the best forms of budgeting and debt relief for your unique financial situation. Some credit counsellors will also work with you on a debt management plan. This is a formalized plan they will produce to ensure you keep track of your finances, combine your debts, and work to reduce your interest rate and debt should you adhere to the plan.

Debt settlement

It is possible to gain a reduction in your debt without a free Canadian government grant, but instead through debt settlement. In Canada, there are both formal and informal methods of debt settlement. The formal methods are legally backed and refers to a consumer proposal. Informal methods are where a debtor or a debt settlement company attempt to negotiate with creditors to reduce their overall debt in exchange for a fee. This negotiation is usually either offering creditors a lump sum or confirming a repayment plan to reduce debts. The important point to note about debt settlements, however, is that they are not guaranteed and can sometimes result in requiring a consumer proposal or bankruptcy regardless.

Consumer proposal

A consumer proposal is one of the most popular ways to reduce your debt, often by up to 80%. In Canada, it is the only legal form of debt settlement, and is a formal agreement put in place with creditors. A Licensed Insolvency Trustee will administer a consumer proposal by working with you to establish a reasonable amount to repay your creditors each month. They will then negotiate with your creditors to have this agreed, in exchange for the clearance of any remaining debts. This is favourable for creditors over bankruptcy because it means they will likely receive more. For debtors, a consumer proposal often means a substantial reduction in debt, and the ability to keep any assets. Spergel has helped over 100,000 Canadians become debt free with consumer proposals.


Bankruptcy is often considered the last resort when it comes to debt relief, but should your debts be overwhelming, it could be a good option. Despite the lack of free Canadian government grants, bankruptcy is a legal form of debt relief that is supported by the Bankruptcy and Insolvency Act. In Canada, bankruptcy eliminates unmanageable debts in exchange for the assignment of any non-exempt assets to a Licensed Insolvency Trustee. It generates an automatic stay of proceedings, and enables debtors to start a fresh financial future. There are some consequences including an impact on your credit report that should be considered before filing bankruptcy. At Spergel, our experienced Licensed Insolvency Trustees will guide you through each step of the process.

Although there are no free Canadian government grants to claim, there are a number of different debt relief options out there for you. There is a method for everyone, no matter how large or small your debts may be. It is also important to remain cautious of businesses claiming to be government approved in their debt relief methods. The best action to take is to speak to a Licensed Insolvency Trustee, who are the only professionals legally permitted to administer all forms of debt relief in Canada. They will analyze your financial circumstances and recommend the best form of debt relief for you.

If you would like to know more about debt relief alternatives to free Canadian government grants, book a free consultation with one of the experienced Licensed Insolvency Trustees at Spergel. We have been helping Canadians gain debt relief for over thirty years, and we can help you too. Reach out today – you owe it to yourself.


Jeff Adiken

Jeff Adiken is a Certified General Accountant and Chartered Insolvency and Restructuring Professional with over 18 years’ experience as an LIT (Licensed Insolvency Trustee). He also manages all of Spergel's personal insolvency offices and is our resident expert on credit card debt and debt-free living. When his 'manager hat' comes off at the end of the day, Jeff is happiest spending quality time with his family at home.

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