Debt write off Canada: how to clear your debts

Posted on 1 November 2022

Written by Colin Boulton

When you are drowning in debt, many of us simply want a debt write off in order to clear our debts for good. Although not always quite as simple as just having your debts written off, there are a number of forms of debt relief to choose from. You may even qualify for a free Canadian government grant to go towards your debt. Sometimes the options can become overwhelming. As Licensed Insolvency Trustees are the only professionals legally able to file all forms of debt relief in Canada, they are usually a good first port of call to help you on your journey to financial freedom. At Spergel, our Licensed Insolvency Trustees have been helping Canadians gain debt relief for over thirty years. In this article, we share how you can gain a debt write off in Canada, and your options for doing so.

How to get a debt write off

If you feel your debts are spiralling out of control, it is time to get support. No matter how bad you may feel your financial situation is, there is always a form of debt relief out there to help you. Financial trouble can cause mental health problems, and so the sooner you get support, the sooner you can become relieved of your debt. Do not be pressured into high fees by taking out a high interest loan like a payday loan to offer short term relief on your debts – instead, speak to a reputable financial professional like a Licensed Insolvency Trustee. They will be able to explain all of your debt relief options to you and help you to choose the pathway that makes the most sense for you and your financial circumstances. Most Licensed Insolvency Trustees will offer a free, no obligation consultation. You may decide to speak to your creditors in order to try and get a debt write off. Although it can be intimidating, your creditors will want a solution when it comes to paying off your debts. They may be able to help if you are struggling to make your minimum payments each month. They could agree to give you a debt write off for older debts if you are able to provide a lump sum, or they might work with you on a payment plan or agree to reduce your minimum payments. Before you agree to anything, ensure it is manageable and that you understand what the agreement means in practice to you. Get it in writing too.

Forms of debt write off

There are various forms of debt write off in Canada. Some are legally backed to ensure you legitimately gain clearance from your debt, while others are reliant on informal agreements with clients and therefore much riskier. Each individual’s financial circumstances are unique, and so there will be a preferred form of debt relief for each person. We recommend speaking to a Licensed Insolvency Trustee for advice on the best pathway to debt relief for you and your financial situation. Here is an overview of the top forms of debt write off in Canada:

Debt management plan

A debt management plan is an agreement with some or all of your creditors, usually produced in credit counselling. It can provide a form of debt write off by often offering interest relief which can assist with your overall debt. You may also be able to negotiate some of your debt with your creditors, especially if you are able to provide a lump sum. Usually, it involves coming to an agreement on an amount to pay each month across a period of time. Before you agree to a debt management plan, you should ensure you fully understand what the financial impact of your debt management plan will be. A non-profit credit counsellor will typically prepare a debt management plan for a number of years for you, summarizing your debts. You will likely pay the credit counselling agency, who will then distribute the funds to your creditors.

Debt settlement

A debt settlement is an informal agreement made with your creditors to repay some of your debt, often allowing a form of debt write off. Usually, it involves a debt settlement company attempting to negotiate a repayment plan with your creditors on your behalf for a fee. The downside of a debt settlement is that it is not guaranteed, and you need to pay in order to complete the process. A lump sum may work better as a negotiation tactic. A debt settlement can be carried out by yourself, a debt settlement company, or a debt consultation. One thing to be wary of with a debt settlement is that sometimes you will be charged fees for a debt settlement that cannot be agreed, only to be referred to a Licensed Insolvency Trustee anyway to file a consumer proposal instead.

Consumer proposal

A consumer proposal is a legal form of debt settlement, in line with the Bankruptcy and Insolvency Act. A popular bankruptcy alternative, a consumer proposal works by you and your Licensed Insolvency Trustee putting forward an affordable monthly debt repayment figure. Your Licensed Insolvency Trustee will then work to negotiate with your creditors on your behalf. If your consumer proposal is accepted, you will receive a debt write off of any remaining debts outside of your monthly payments. It can reduce your debt by up to 80%. Once your payments are made across the agreed period of time up to five years, your debts are cleared and you can begin to rebuild your credit score. Other advantages of a consumer proposal include protection from your creditors via a stay of proceedings, and the ability to keep your assets.


Bankruptcy in Canada is the legal process of assigning any non-exempt assets you may have to a Licensed Insolvency Trustee in exchange for the clearance of any unsecured debts. It allows you a fresh financial future by providing a debt write off, and has a number of other advantages including offering protection from your creditors and swiftly ending any legal action including wage garnishments. Although many people believe that bankruptcy means you lose all your assets, this is not the case – in fact, it is possible to keep some essential items including your home and vehicle. At Spergel, unlike other bankruptcy firms, you will be assigned your very own Licensed Insolvency Trustee to walk you through the entire end to end process instead of being passed from person to person.

At Spergel, we have over thirty years’ experience of helping Canadians gain a debt write off and we can help you clear credit card debt, tax debt, car loan debt, and many more types of debt. Our experienced Licensed Insolvency Trustees handle debt relief with compassion and expertise, and we are here to help you – book a free consultation today. You owe it to yourself.

Colin Boulton

Colin Boulton

Colin Boulton 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 unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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