Does The Federal Government Provide Debt Relief?

Does The Federal Government Provide Debt Relief?

Written by Kale Havervold
Fact-checked by Caitlin Wood
Last Updated November 4, 2021

Struggling with debt on a daily basis is an all-to-familiar circumstance for thousands of Canadians. Some can handle it on their own, while others need some help, as the debt they have is simply too large, or they lack the financial knowledge to deal with the debt independently.

One of the first questions that those struggling with debt might ask is, “does the federal government provide debt relief”? The short answer to that question is no. However, that’s not the whole story. This article will explain the reasons why. It will also cover the various alternative options for those who are currently struggling with debt.

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Does The Federal Government Provide Debt Relief?

As we just mentioned, no level of the Canadian Government officially offers or approves any debt relief, or debt consolidation program. So, if you are in need of debt relief in Canada, you will be working with a service, company or program that isn’t run by the government.

Now, that doesn’t mean that the government isn’t connected at all to these programs. Many of these debt relief services or programs require a license to operate, which means there are a few regulations set in place to control what they can do, what they can charge their customers and more.

While the government doesn’t directly offer Canadian citizens any debt-relief options, they do monitor these services to make sure they are licensed, legal, and not scamming the public. Also, in some rare cases, the government will refer people to different credit and debt counselling services. But, once again, these services are not run or provided by the government of Canada in any capacity. Also, a debt consolidation company that gets referrals from the government won’t brand themselves as “government of Canada debt consolidation”. These organizations are held in high regard and are respected, so they wouldn’t aim to mislead their potential clients in that manner.

debt management options

What About “Government Approved” Debt Programs?

If you are shocked by the fact that the government doesn’t provide debt relief options, you’re not alone. There is a good chance that while watching TV or doing some online research, you have likely come across an advertisement or a website for various entities that claim they are “government approved” debt relief programs.

You may have also seen terms like “government of Canada debt relief grants” or “free Canadian government grants to pay off debt”. While these look appealing and might make you think there are some ways for you “get a deal” when dealing with your debt, sadly, this is not the case.

Any company, individual, service, or program that claims they are “government approved” is often embellishing their reputation or simply misleading you. As was mentioned earlier, the government doesn’t offer any debt relief services and doesn’t publicly approve or endorse any either.

What these companies often mean by claiming to be “government approved” is that they have obtained a license from the government or that they are offering a consumer proposal, which is defined within the Bankruptcy and Insolvency Act.

So while many of these services are regulated or licensed by the government, it doesn’t mean that they are approved by them. Simply put, companies will use those buzz words as a way to make their option seem like the more official, prestigious, and best one for people who are struggling with debt.

Check out if bankruptcy is the right option for tax debt.

What Are Some Alternatives?

So, while no debt relief options are provided directly from the government, there are still some great options to not only help you get out of debt but also to educate yourself about the world of finance. With that in mind, here are some of the best debt relief options for you in Canada:

Debt Consolidation

Debt consolidation is perfect for those with a lot of debt from a variety of different places. It can be extremely hard to manage several debts of different origins. Essentially, debt consolidation helps by rolling your numerous, smaller debts into one large debt.

Want to know how debt consolidation can help your financial situation?

Oftentimes, you will be able to get a lower interest rate on this debt consolidation loan and in the process, managing your debts will become much easier as you only have one to pay. There are both unsecured and secured options available and the one you end up choosing will depend on the assets you have, your credit score, and more.

Did your application for a debt consolidation loan get denied?

Debt Management/Credit Counselling Programs

If you are not able to qualify for a debt consolidation loan or you simply want to get more educated on budgeting and your finances, a credit counselling service might be worth a look. These services will pair you up with a qualified and experienced credit counsellor, who will sit down with you and educate you on budgeting, while the two of you work together to figure out what option is right for your situation.

Learn the types of debt you can consolidate with a debt management program.

Now, these counsellors aren’t miracle workers. You will still need to buckle down and adhere to the plan you guys come up with, or else it won’t work. However, if you follow your counsellor’s instructions, there is a good chance you will be able to pay your debts in full. In addition, you’ll leave the program armed with the financial knowledge to keep yourself (and your debt) in check for the rest of your life.

Check this out if you’re trying to decide if credit counselling is right for you?

Debt Settlement

If you are very deep in debt and don’t have enough money (or a high enough income) to get out of it, settling your debt could be an option. In a debt settlement, you will work closely with a counsellor, who will reach out to your creditors and try to agree upon a possible debt reduction.

Find out if you’ll qualify for debt settlement.

This will ultimately lead to you paying less of your debts off, instead of the entirety of your outstanding debt. While that sounds amazing, a debt settlement isn’t often a great idea, as future creditors will know you only managed to pay a portion of the debt you owed, which might keep them from lending to you.

Learn how to negotiate a debt settlement on your own?


There is a good chance you have heard of bankruptcy and know it is the most extreme of the debt relief options at your disposal. Bankruptcy is a legal proceeding that provides debt relief to those who have no feasible way to get out of debt. Sure, bankruptcy will rid you of your debts, but there are some serious side effects.

For example, your credit is damaged for over five years. Some of your assets such as jewellery, real estate, and other possessions might be lost and all credit accounts will be frozen while you are in the bankruptcy process. So again, before considering bankruptcy, make sure that all other options have been exhausted.

Here are some better options you can consider before your file for bankruptcy.

All of these options will affect your credit report and credit score in different ways, and for different amounts of time, but all are viable options to get out of debt, depending on your situation and goals.

Final Thoughts

The government does not provide any debt relief for citizens who are struggling with debts. However, each province across the country has a variety of different debt relief options, all of which can be highly effective in helping you get out of debt.

Hopefully, this article has shed some light on the various options you have to help you get out of debt. And remember, just because something says its “government approved” doesn’t necessarily mean it’s better than the no-fee or non-profit credit counselling services in your area. As always, it is important to do research on the various options you come across and see which one best fits your unique situation.

Rating of 4/5 based on 16 votes.

In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post,, and Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.

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