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When it comes to consumer debt, being in over your head can be extremely stressful. When you are struggling to make minimum payments, missing payments or dodging calls from collectors, you need help.

The sooner you get on top of your debt, the better. Once the money you owe becomes overwhelming, it can be challenging to earn enough to make minimum payments. Increased interest charges and late payment fees add up and creditors may raise your interest rates too. As the amount you owe increases and as you begin to miss payments and max out credit cards, your credit score can be reduced significantly.

While we don’t exactly have debt forgiveness, Canada does have non-profit credit counselling services and Licensed Insolvency Trustees in every province and territory. These professionals can help with finding solutions to get out from under the crushing load of heavy debt.

Frankly speaking, there is no easy solution. Even with help, this is going to take time and effort on your part. Aside from extra stress, consequences for spending outside of our means can include the need for a spending freeze and a negative impact on your credit score.

Can You Find Debt Forgiveness on Your Own?

There are a few ways you can get proactive and start finding solutions when things start to get tight.

Create a Budget

Create a budget and develop a plan for paying down debt. There are plenty of free worksheets, budget templates, and many mobile app options to help you with this. Moreover, a budget will help you track your spending and help you identify areas to improve in.

Consolidate Your Debt

Consolidate debt into a lower interest credit card or a personal loan, if you qualify. This solution is only going to work if you have your budget in place and you can make the payment. Otherwise, you may end up in worse condition, with more debt than before.

Request a Lower Rate

Another option is to call creditors yourself and ask for a lower rate. This probably won’t work, if you are already missing payments or if your credit cards are maxed out. If you are still in good shape, be firm but polite, and be persistent. Their automatic response will probably be no, so ask to speak to a supervisor.

If you can pay down your debt, on your own, that is usually the best way to go. You will feel an incredible sense of accomplishment and your credit score will improve (if it was hurting), over time. However, it may not always be possible and if your minimum payments are really high, it may take an unreasonable amount of time.

If you do have a budget in place and you’re making sacrifices, but you are still slipping further into debt, it’s time to reach out for support. When you decide to seek assistance, there are several options available.

Speak With A Debt Expert


Seeking Help

You can get help with debt relief from a non-profit credit counsellor. They can support you through the process of creating a budget, provide education in money management, and refer you to insolvency lawyers if that is the route you choose to take.

Debt Management Program or Debt Repayment Plan

In this scenario, you hire a credit counselor who will contact each of your creditors and negotiate a lower rate of interest and/or a lower full payment amount. In some cases, the interest can be eliminated. With the help of a credit counselling agency, all your unsecured debt is consolidated into one place with a more manageable payment.  

Debt management plans don’t always affect your credit but if you need to close credit card accounts, your credit score may be reduced.

Click here to discover the types of debt you can consolidate with a debt management program.

Debt Settlement

When you choose a debt settlement, a credit counsellor will work on your behalf, to negotiate a lump sum payment to each of your creditors, with the stipulation that the rest will be forgiven. The settlement is usually between 20%-80% of the full amount. While the lower end of the scale is rare, you can save a significant amount of money.

How will debt settlement affect your credit? Find out here.  

This option may not be possible for everyone due to a large sum of money needed to carry the settlement forward. The fee for debt settlement is usually a percentage of the amount you owe or the amount that was forgiven. Unfortunately, a successful debt settlement will impact your credit score.

In some cases, you will need to negotiate with the help of a Licensed Insolvency Trustee.

Consumer Proposal

Another option for debt relief is to file a consumer proposal. In this case, the insolvency trustee will go to bat or you, through the courts, and negotiate with creditors, to reduce the amount you owe them. Interest will stop accumulating, collectors will stop calling and you will be protected from wage garnishments and legal action. You will get to keep your assets, but this action will have a significant effect on your credit score.

Read this to find out exactly how a consumer proposal will affect your credit.


Usually, a last resort, the decision to file bankruptcy can be difficult to make. In some cases, however, the benefits can far outweigh the drawbacks. Yes, it will have an impact on your credit score for several years, but so can the missed payments when you continue to deal with overwhelming debt. You will need to surrender certain assets as terms of the bankruptcy, but all your unsecured debts will be forgiven.

Why Does My Credit Score Matter?

There are people besides lenders who are permitted to look at your credit score, such as landlords, potential employers, and insurance companies. If you are not planning a move, seeking employment or hoping to borrow money, your credit score may not matter too much, right now. If your debt is overwhelming, taking a hit might be worth it. It takes time and persistence, but you can always build it up again later.

What Questions Should You Ask?

When you are looking at debt relief, there are several questions you need to ask.

  • How do I qualify?
  • How much will it cost?
  • What are the details of the fees involved?
  • Which creditors will be paid?
  • Will it affect my income taxes?

Are There Any Debts That Can’t Be Reduced or Forgiven?

When you decide which debt relief option to take, make sure you are clear about which accounts will be included in the program. Typically, credit card debt, unsecured lines of credit, payday loans and overdue bills can be forgiven. Surprisingly, when it comes to debt forgiveness, CRA debts (such as HST and Income Taxes) are even included.

Does owing taxes to the CRA affect your credit score? Look here to find out.  

Student Loans

Normally, student loans cannot be included in bankruptcy or consumer proposals for at least 7 years after finishing school. There is a hardship provision, where if you are working in your field of education, you’ve shown “good faith” by using your student loans wisely, for education purposes, and you have made every effort to pay them back, that time may be reduced to 5 years.

Child support and Alimony

These debts will need to be paid, regardless of your financial situation.

Secured Loans

Depending on your circumstances, you may be required to sell a home or vehicle to pay off mortgages or car loans. Failing that, you could face foreclosure or repossession.

Taking The First Step

Before you make any decisions about debt forgiveness, consider your options carefully. You may feel stuck now, but you don’t need to stay here forever. Once you clean up your debt, you can begin to rebuild your credit again. The key is to change the way you manage your money. With some clear thinking, an effective budget, and the motivation to stick to your plan, you can have a positive relationship with your finances and work toward your future goals.

Interested in More?

If you’re interested in getting the help you need now or simply want some more information, we can help.

Shari Talbot avatar on Loans Canada
Shari Talbot

Shari is a Freelance Writer, specializing in personal finance, business blog content and education. She enjoys taking complex information and putting it into a form the average consumer can understand. When she is not working, she homeschools her children, supports her husband in business, and enjoys traveling with her family.

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