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One of the first questions that those struggling with debt ask is, “are there government debt relief programs”? 

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.

Are There Federal Government Debt Relief Programs In Canada?

The Canadian federal government doesn’t directly give money to consumers to help them repay their debt. However, there are debt forgiveness programs that are regulated by the federal government’s Bankruptcy and Insolvency Act (BIA). This includes consumer proposals and bankruptcies.

You may also be able to seek some level of debt relief by speaking directly with your creditor. However, they’ll likely only offer you a deferral in payments or interest charges for a limited time period. 

Types Of Government Debt Relief Programs

Both consumer proposals and bankruptcies are last resorts when it comes to dealing with unresolved debt. These options are typically considered by consumers who are unable to keep up with their bill payments and their debt continues to mount. 

Consumer Proposal

A consumer proposal is a legal agreement made between you and your creditors to pay back a portion of your debt. This government-regulated program is facilitated by a Licensed Insolvency Trustee (LIT). It typically results in a significant reduction in overall debt. This is done by either making debt payments more affordable or by reducing interest costs. The new payment amount that your trustee negotiates on your behalf is based largely on your income and assets. 

This option is available to you if your debts — excluding your mortgage — do not exceed $250,000. A consumer proposal will provide you with protection from creditors and debt collectors. It will also stop any wage garnishments and accumulation of interest on your debt as soon as you file.


Bankruptcy is a legal proceeding that provides debt relief to those who have no feasible way to get out of debt. Like a consumer proposal, bankruptcy is facilitated by an LIT, who will review your financial situation. They may take over your assets, and ensure you carry through with your bankruptcy duties.   

As part of your obligations, you’ll be required to attend two crediting counselling sessions. You’ll also need to file monthly income and expense reports. Depending on your situation, you can be discharged from bankruptcy in as little as 9 months.

Bankruptcy is better suited for those with very high debt in excess of $250,000, not including mortgages.

Risks Of Bankruptcy

Sure, bankruptcy will rid you of your debts, but there are some serious side effects.

Speak With A Debt Expert


Government Debt Relief Programs For Student Loans In Canada

Paying for post-secondary education can be extremely expensive. While the cost of tuition varies quite a bit across the provinces, the national average for full-time undergraduate studies is $6,834 for the 2022/2023 year, and for full-time graduate students, the average is $7,437 per year. Given the high cost of attending college or university, many Canadian students choose to take out student loans to pay for their studies. 

Over the course of a few years, the total cost of tuition can be very high and require several years to repay. To help offset these financial hurdles, many provinces offer some form of debt relief for student loans. 

Student Loan Forgiveness For Doctors And Nurses In Canada

Medical students enrolled in studies to become nurses, doctors, and other types of medical professions may be eligible for student loan forgiveness from the Canadian government. Loan forgiveness is only offered to cover outstanding Canada Student Loans balances. It cannot be applied to private student loans, Canada Student Loans that have been converted to lines of credit, or Ontario Medical Resident Loans. Further, Canada Student Loan forgiveness is only applicable to the federal portion of a student loan, not the provincial or territorial portion.

Family physicians can receive up to $40,000 in Canada Student Loan forgiveness over a maximum time period of 5 years. Nurses or nurse practitioners can receive up to $20,000 over a maximum time period of 5 years ($4,000 per year).

Provincial Government Debt Relief Programs For Student Loans

Various provinces in Canada offer provincial student loan forgiveness programs, including the following: 

BC Loan Forgiveness Program

Graduates in specific high-demand jobs may be eligible for provincial student loan forgiveness if they work at publicly-backed organizations in underserved areas in BC, or with children in jobs that are in need of workers.

Those who qualify for the BC Loan Forgiveness Program will have the outstanding provincial portion of their federal-provincial integrated student loan debt forgiven up to 20% a year for a maximum of 5 years. All or a portion of your BC student loan debt will be forgiven if you complete 5 years of work. While in the loan forgiveness program, the province will also cover the outstanding interest that accrued during every year you’re registered in the program. 

Quebec Loan Remission Program

The Quebec Loan Remission Program forgives 15% of provincial student loan debt. Eligibility for the program requires the completion of studies within a specific period of time and after receipt of a bursary under the Loans and Bursaries Program for each year of study. The specified time periods vary from anywhere between 16 to 32 months, depending on the area of study. 

You must submit the application for loan remission within 3 years of finishing your program. 

PEI Debt Reduction Program

The PEI Debt Reduction Grant program provides graduates with some financial relief from their student loan debt. To qualify for this program, you must be a resident of PEI and have lived in the province for at least 6 months before applying. You must also have graduated from a post-secondary institution over the last 3 years.

The Debt Reduction Grant is only applicable to the provincial portion of your student loan. If eligible, you may receive up to $3,500 per year, as long as it does not exceed the amount borrowed. 

Nova Scotia Student Loan Forgiveness Program

Students who graduate from a non-professional undergraduate program in Nova Scotia may be able to have the provincial portion of their student loans forgiven through the province’s Student Loan Forgiveness Program. Eligible graduates can receive up to $20,400 over 5 years of study.

Other Debt Relief Options

Here are some better debt relief options you can consider before your file for bankruptcy. All of these options may 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.

Debt Consolidation

Debt consolidation is perfect for those who have multiple debts. It can be extremely hard to manage several debts of different origins. Essentially, debt consolidation involves getting a large loan such as a personal loan or line of credit to help roll your smaller debts into one large loan. 

This is particularly useful if you have several small high-interest debts. By consolidating all these loans into one low-interest debt consolidation loan, you’ll be to save a lot of money on interest. Moreover, managing your debts will become much easier as you only have one to pay. 

Debt Management Programs (DMP)

If you can’t qualify for a debt consolidation loan due to a low income or poor credit, a DMP may be a better option. Here, you’ll work with a credit counsellor to consolidate your debts. They work with your creditors to come up with a new payment plan usually between 3 to 5 years long. However, with this program, your debts won’t be reduced, you’ll have to repay everything. Though they may be able to stop your creditors from charging you more interest. 

Debt Settlement

If you have a large amount of debt and don’t have a high enough income to get out of it but have some savings to put towards the debt, settling your debt could be an option. In a debt settlement, you will work closely with your creditors and try and reduce the amount you owe

Generally speaking, creditors expect a lump sum payment in these situations, though some may agree to an alternative payment plan.  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.

What Out For False Advertising

You may have 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 its reputation or simply misleading you. 

Government Debt Relief Programs FAQs

What are the risks of a Consumer Proposal?

There are numerous drawbacks to consider when getting a consumer proposal, such as:  
  • Creditors may reject your proposal
  • Your proposal may be annulled if you can’t keep up with your payments
  • It typically takes longer to complete than a bankruptcy
  • Your credit score may be negatively affected
  • Consumer proposals stay on your credit report for at least 3 years.

What does it mean when a debt relief company says they’re  “government approved?

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.

Does the government offer debt relief?

While the government doesn’t directly offer Canadian citizens any debt-relief options, they do monitor services that offer 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.

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.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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