Canada debt forgiveness: your options

Posted on 24 March 2023

Written by Chris Galea

You may well be wondering which Canada debt forgiveness programs are out there, especially if you are tired of juggling multiple overdue bill payments. If you are having difficulty making debt payments and feel like your financial situation is not quite where you would like it to be, you are in luck. In Canada, there are two primary debt forgiveness options – one which eliminates your debts completely, and another that forgives some of your debt. Both Canada debt forgiveness options will help you to reduce your debt so that you can begin a fresh financial future. In this article, we share the top ways to gain Canada debt forgiveness, and help you to understand which option may work best for you and your financial circumstances.

The two types of Canada debt forgiveness

You may be surprised to learn that there are only two forms of Canada debt forgiveness – this is because these are the only forms of legal debt relief in Canada. Both of these types of debt forgiveness allow you to legally reduce or eliminate your unsecured debts. They both need to be filed by a Licensed Insolvency Trustee, the only professionals in Canada legally able to file all forms of debt forgiveness. These options are a consumer proposal and bankruptcy – both of which we will explore in more detail in this article. You should be wary of companies claiming to offer government affiliated debt programs – they simply do not exist. In fact, many Canadians who have fallen for one of these ‘schemes’ end up requiring support from a Licensed Insolvency Trustee in the long run anyway. The only professionals who can legally help you gain debt relief and offer protection from your creditors are Licensed Insolvency Trustees.

Filing a consumer proposal

Consumer proposals are a popular bankruptcy alternative in Canada, and a great form of debt forgiveness. Also considered a legal debt settlement, consumer proposals are the process of establishing an affordable monthly payment with the support of a Licensed Insolvency Trustee. If approved by your creditors, you just need to commit to making your monthly payment for a period of up to five years – up to 80% of your remaining unsecured debt is cleared. Consumer proposals have a number of benefits, including allowing you to consolidate your debts, stop any interest charges, and offer protection from your creditors. Consumer proposals also enable you to keep your assets, including your home and car. Whether you are in need of an affordable form of debt consolidation, or need a repayment plan that is structured while providing forgiveness on some of your debt, consumer proposals are unique to each individual’s circumstances. At Spergel, we have a 99% acceptance rate on any consumer proposals we file.

Advantages of filing a consumer proposal

There are many benefits of filing a consumer proposal in Canada:

  • A bankruptcy alternative, meaning that you face more lenient consequences than you would when filing bankruptcy
  • Reduction of your unsecured debt by up to 80%
  • Consolidate all your debts without borrowing, including credit card debt, payday loans, tax debt, student loan debt, and so on
  • Manageable monthly payments that you can afford
  • Protection from your creditors via a stay of proceedings
  • Have a ‘debt free date’ in mind – know exactly when you will be cleared of your debts
  • Keep your assets, including your home and car

If you are interested in filing a consumer proposal, book a free consultation with an experienced Licensed Insolvency Trustee at Spergel to discuss your options.

Filing bankruptcy

Bankruptcy in Canada is the process of assigning any non-exempt assets you may have over to a Licensed Insolvency Trustee in exchange for the clearance of your unsecured debts. Your Licensed Insolvency Trustee will sell your non-exempt assets in order to gain any proceeds that can go towards your creditors. By eliminating your unsecured debts, it is the best way to gain a fresh financial future. Contrary to popular belief, you do not lose all your assets when filing bankruptcy. As it is intended to offer you a fresh start, this would be counterproductive. Instead, you can keep key valuables including your home, a vehicle, and clothes within a certain threshold depending on your province of residence. See, for example, Ontario bankruptcy exemptions. Bankruptcy will also offer protection from your creditors, putting an immediate end to collection calls and wage garnishments. At Spergel, unlike other bankruptcy firms, you will be assigned your very own Licensed Insolvency Trustee to walk you through the entire debt relief process, instead of passing you from person to person. We treat all individuals with compassion and understanding, and are here to help you.

Advantages of filing bankruptcy

There are many benefits to filing bankruptcy as a means of Canada debt forgiveness:

  • Offers you a fresh financial future with unsecured debts eliminated
  • Provides peace of mind, and can resolve many mental health problems caused by debt
  • A countdown to debt freedom – most first time bankruptcies in Canada are discharged within nine months
  • Protection from creditors
  • Low cost form of debt relief, as the cost is not associated with the amount of debt owed
  • Your creditors must comply with your bankruptcy

Learn more about life after bankruptcy.

How to gain debt forgiveness in Canada

No matter which form of debt relief may be best for you, your first step should be to book a free consultation with an experienced Licensed Insolvency Trustee. They will firstly review your financial circumstances and assess your available debt forgiveness options, and walk you through each of them. At Spergel, we have offices across Canada, and have been helping Canadians gain debt relief for over ten years. We offer debt support services in-person, and virtually. Licensed Insolvency Trustees are there for you to ask questions, discuss your situation, and work together on a debt relief solution. In order to qualify for Canada debt forgiveness, you simply need to owe at least $1,000 and be unable to repay your debts when they are owed – i.e. be insolvent. Although the idea of speaking to a professional about Canada debt forgiveness can feel intimidating and unnerving for many individuals, at Spergel, we treat everyone we speak to with compassion and understanding. We want to help you gain a way forward.

You can learn more about Canada debt forgiveness by booking a free confidential consultation with Spergel today. Our experienced Licensed Insolvency Trustees will work with you to understand your financial circumstances, and help you to understand your debt relief options. We are here to help you get your finances back on track. Reach out today – you owe it to yourself.


Chris Galea

Chris Galea is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on tax debt, COVID debt, and the region of Saskatchewan, Canada. When he’s not at the office educating people about bankruptcies and consumer proposals, Chris is playing pick-up hockey with his friends, spending time with his family, and learning Spanish!

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