Owning a home in Canada is a significant achievement. However, many homeowners are facing increasing financial pressure due to rising debt levels. At the end of 2024, total consumer debt in Canada reached $2.56 trillion, marking a 4.6% increase from the previous year. Mortgage debt alone accounted for $2.2 trillion of this total, reflecting a 3.5% year-over-year growth. This surge in debt has led to higher debt-servicing costs, with Canadian households spending approximately 15% of their disposable income on debt payments. This poses some important questions regarding debt relief options for Canadian homeowners.
At Spergel, we speak with numerous Canadians who feel trapped between mounting debt and the home they’ve worked hard to acquire. If this resonates with you, know that you’re not alone – and there are options available to help you navigate this challenging financial landscape.
Here’s what homeowners need to know about leveraging home equity to manage debt and how to determine the most suitable debt relief option for your situation.
First, what is home equity?
Home equity is the difference between your home’s current market value and the remaining balance on your mortgage. For example, if your home is worth $600,000 and you owe $400,000 on your mortgage, you have $200,000 in equity. Home equity is a valuable asset – and when filing a consumer proposal, it becomes one factor in building your repayment plan.
Many Canadians don’t realize that this equity can open doors to a range of debt relief solutions – some that let you keep your home while getting your finances back on track.
Home equity doesn’t disqualify you from debt relief – it simply changes the strategy
If you’re a Canadian homeowner struggling with debt, it’s natural to wonder:
- “I have a house – does that mean I don’t qualify for help?”
- “I’ve been told I can’t file because I have equity.”
- “Do I have to sell my house to get relief?”
We hear these concerns every day. And here’s the truth:
Having equity in your home does not mean you can’t get help.
At Spergel, we believe that home equity is not a disqualification – it’s an opportunity to restructure your debt in a way that supports your long-term financial goals.
Option 1: use a home equity loan (or HELOC)
If your credit is still in good shape, you may qualify for a home equity loan or Home Equity Line of Credit (HELOC). These options allow you to borrow against your home’s equity to pay off high-interest debt like credit cards, personal loans, or payday loans.
Pros of a home equity loan:
- Lower interest rates compared to unsecured debt
- One monthly payment to manage
- You retain full control of your assets
Cons of a home equity loan:
- You’re securing more debt against your home
- If you miss payments, your home could be at risk
- Not always accessible if your credit score has declined
If you’ve already tried this route and it’s not helping, it may be time to consider a more structured debt relief option.
Option 2: Consumer proposal
A consumer proposal is a legal debt settlement program administered by a Licensed Insolvency Trustee. You repay a portion of your debt based on what you can afford – interest-free – and the rest is forgiven.
If you have home equity, you can still qualify. In fact, many homeowners choose a consumer proposal to avoid selling their home while reducing their debt.
- Keep your home and other assets
- Stop collection calls and wage garnishments
- Pay off debt with one manageable monthly payment
- Avoid bankruptcy
- Impacts your credit for a period (typically 3 years after completion)
- You must have a stable income to make proposal payments
At Spergel, our Licensed Insolvency Trustees work with you to tailor a consumer proposal that reflects your specific situation – including your equity, income, and total debt.
Option 3: Debt consolidation loan
A debt consolidation loan combines multiple debts into one loan with a lower interest rate. Homeowners may qualify for better terms if they use their home as collateral.
Pros of a debt consolidation loan:
- Simplifies repayment into one monthly bill
- May reduce the amount you pay in interest
- Can help improve your credit score over time if you make regular payments
Cons of a debt consolidation loan:
- You still owe the full amount, just at a different rate
- You may need strong credit to qualify
- Doesn’t reduce your total debt load like a consumer proposal would
This may be a good short-term solution if your income is steady and your debt is manageable.
Option 4: Bankruptcy (as a last resort)
If your debt is severe and you’re unable to repay even a portion through a consumer proposal, bankruptcy may be the best path to financial relief. However, it’s not necessarily a given that you’ll lose your home. In some cases, homeowners with equity may be able to keep their property by making arrangements with their Licensed Insolvency Trustee – such as buying back the equity over time.
- Complete debt forgiveness
- Legal protection from creditors
- A fresh start financially
Cons of bankruptcy:
- May require selling non-exempt assets or paying into the estate
- Strong impact on your credit (though it does recover over time)
- More complex if you have equity
What happens if you file a consumer proposal with equity?
When you work with a Licensed Insolvency Trustee at Spergel, we take your equity into account and help design a consumer proposal that makes sense for your situation. That might look like:
- Adjusting your monthly payments to reflect your equity and make the offer more appealing to your creditors
- Allowing you to keep your home, rather than forcing you to sell it
- Creating a longer-term strategy – such as refinancing at mortgage renewal to pay off the consumer proposal sooner
Every case is different, which is why our team takes a strategic approach – not a one-size-fits-all solution.
Real debt relief for real life
At Spergel, we’ve helped over one hundred thousand homeowners navigate debt while keeping their homes – and peace of mind. One of the most important messages we share with our clients is this:
“Having equity doesn’t mean you can’t get help. It just means we’ll structure your consumer proposal in a way that works for your goals.”
Homeowners often assume that having any equity means they’ll automatically be disqualified or forced to repay 100% of what they owe. But that’s not the case. In fact, many homeowners file consumer proposals. We simply look at the equity and adjust the monthly payments accordingly – something that fits your budget. Whether it’s planning around mortgage renewal, balancing monthly affordability, or protecting your home from the get-go, our goal is to make your debt solution work for your real life.
With the right structure and strategy, you can reduce your debt, stay in your home, and finally move forward.
When it might be time to reconsider
The only time we might recommend holding off on a consumer proposal is if:
- You’re actively refinancing this week, or
- You’re firmly against a consumer proposal and only looking for a loan or credit counselling
Otherwise, home equity should never be a reason to walk away from getting the debt relief support you deserve.
Debt relief options for Canadian homeowners: FAQs
Here are some of the most common questions we receive about debt relief options for Canadian homeowners:
Yes, Canada offers government-regulated debt relief programs, notably the consumer proposal and bankruptcy, both governed by the Bankruptcy and Insolvency Act. A consumer proposal is a formal agreement administered by a Licensed Insolvency Trustee that allows you to repay a portion of your unsecured debt over a period of up to five years, with the remaining debt forgiven upon completion. This option enables you to avoid bankruptcy, keep your assets, and make manageable monthly payments without accruing interest.
Alternatively, bankruptcy provides a legal process for individuals unable to meet their debt obligations, resulting in the discharge of most debts but potentially requiring the surrender of certain assets. Both options offer protection from creditor actions and are designed to provide a fresh financial start.
How do I get my debt written off in Canada?
To get your debt written off in Canada, you’ll need to work with a Licensed Insolvency Trustee through a formal process like a consumer proposal or bankruptcy. A consumer proposal lets you settle your debt for less than you owe and repay it over time, with the rest legally forgiven. Bankruptcy is a last resort that wipes out most debts once the process is complete. Both options stop collection calls and wage garnishments, giving you a fresh financial start.
What happens if you can’t pay your mortgage in Canada?
If you can’t pay your mortgage in Canada, your lender may first offer solutions like a payment deferral or restructuring plan. If payments continue to be missed, the lender can begin legal action – typically power of sale or foreclosure – which may result in you losing your home. You could also be held responsible for any shortfall if the sale doesn’t cover what you owe. Acting early by speaking with your lender or a Licensed Insolvency Trustee can help you explore alternatives and avoid more serious consequences.
Talk to a Licensed Insolvency Trustee about your options
Whether you own a condo, townhouse, or detached home – and whether you’ve built up some equity or not – there’s a path forward. At Spergel, we’ll help you understand your full financial picture and find a debt relief plan that’s tailored to you:
- No judgment
- No pressure
- Just honest, strategic advice
Book your free consultation today – and take the first step toward financial freedom, without giving up the place you call home. Because debt shouldn’t decide.