
We understand what it feels like to have debt you can’t seem to escape from. Maybe it started with a job loss, unexpected expenses, or simply living without a budget. However it happened, the stress is real. The good news is that you don’t have to carry it forever.
Your path forward depends on the type of debt you have, how much you owe, and what you can realistically repay. Keep reading to learn how to become debt-free, with advice from Credit Canada’s Counselling Manager, Mike Bergeron.
How to Know It’s Time to Seek Debt Help in Canada
It can be hard to know when it’s time to seek outside debt support. For many people, the wake-up call comes when they’re using credit to keep up with debt payments. This is a strong indication that their debts have outpaced their ability to repay them.
While using a credit card to pay off outstanding debts might silence collectors, it simply transfers your debt to another account, and possibly one with a higher interest rate. The amount of principal owed doesn’t shrink, and the interest may increase.
Think of it as “monthly payment hot potato.” It just goes on and on until, eventually, it stops because you’ve reached a breaking point—but now your card balance is maxed out and you’re left holding the debt
Here are the top five warning signs you may need debt help:
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You’re paying for your credit with credit. Using one form of credit to cover another can lead to a growing cycle of debt.
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You rely on credit to make ends meet. If your income isn’t stretching far enough, credit has to fill the gap and becomes harder to keep up with.
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You struggle with sticking to your budget. Unexpected costs or habits can make it tough to stay on track.
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You don’t have a budget. Without a clear plan for your money, it’s easy to lose control of spending and fall behind.
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You have little to no savings. With rising expenses and debt, saving money becomes out of reach, even for emergencies.
Debt Relief Options in Canada
Trouble with debt doesn’t usually happen overnight. It’s something that often builds slowly over time, until one day you realize it’s become too much. As soon as you recognize any of the above warning signs, it’s important to seek help as soon as possible.
When it comes to debt relief solutions, you have a few different options available to you, including:
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Debt consolidation
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A consumer proposal
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Bankruptcy
Debt Consolidation
There is more than one way to consolidate your debt. For example, a debt consolidation loan is provided by banks, credit unions, and finance companies. It combines multiple loans into a single loan from a single lender with a unified, often lower interest rate. To qualify for this loan, you must have good credit and income.
A debt consolidation loan will cost you in interest payments, possible admin fees, and could impact your credit if you default on your agreed repayments later.
Another option is a Debt Consolidation Program (DCP), often also referred to as a Debt Management Plan, which is an arrangement between the client and a non-profit credit counselling agency like Credit Canada, where the agency acts as an intermediary to work with creditors.
When you enter into a debt consolidation program in Canada, you benefit from:
- Avoiding bankruptcy or a consumer proposal.
- One lower monthly payment.
- Reduced or suspended interest.
- No more collection calls.
- Fixed payments on a set schedule.
- A certified credit counsellor who will work with creditors on your behalf.
- Free debt management program tools.
Consumer Proposals
A consumer proposal is a legal agreement to repay a portion of the debt owed in exchange for some debt forgiveness. This option is available to Canadians under the Bankruptcy and Insolvency Act.
Consumer proposals are administered by a Licensed Insolvency Trustee (LIT), who works with you to come up with a proposal to submit to creditors. This often allows you to reduce the amount you owe, get a payment extension, or both. It is typically considered a last resort before filing for bankruptcy.
When you file a consumer proposal, your credit report will show an R7 rating for the proposal, which stays on your record for 3 years after it’s paid off or 6 years from the date it was filed, whichever comes first.
Bankruptcy
If you are otherwise unable to pay your debts, you may need to file for bankruptcy. Bankruptcy is a legal process for individuals who are insolvent and unable to repay their debts. This last-resort financial step will likely require that you surrender some assets in exchange for wiping out some or all of your unsecured debt.
When you file for bankruptcy, your credit report will show an R9 rating, which stays on your record for 6 years after you’re discharged (for a first bankruptcy) and 14 years after discharge (for a second bankruptcy).
If you are considering bankruptcy, contact a Licensed Insolvency Trustee (LIT) to review your options and determine if this is the best option available to you.
Who Provides Debt Relief in Canada?
Across Canada, many professionals and organizations offer debt relief help and programs. These include credit counsellors, Licensed Insolvency Trustees (LITs), debt consultants, and money coaches:
Non-Profit Credit Counsellors
A non-profit Credit Counsellor offers free, confidential one-on-one debt management support and debt repayment solutions. Credit Canada is an example of a nonprofit credit counselling agency.
When seeking support from a nonprofit credit counselling agency, it’s important to verify that they are accredited, to ensure they meet strict standards of ethics, transparency, and client care. For example, Credit Canada is accredited by Credit Counselling Canada.
Licensed Insolvency Trustee (LITs)
Licensed Insolvency Trustees (LITs) are for-profit businesses. They are federally regulated professionals who provide advice and services to individuals and businesses with debt problems.
LITs (like MNP LTD.) are overseen by The Office of the Superintendent of Bankruptcy (OSB) and must adhere to federal standards of practice. The LIT is subject to the Bankruptcy and Insolvency Act of Canada ensuring compliance and outlining duties specific to both the LIT and debtor.
LITs support individuals with the filing of a voluntary bankruptcy or a consumer proposal. The LIT has the power to stop collection and legal action with legal protection that stops collection calls and lawsuits upon filing. If you’re unable to pay down your debt on your own or with the support of a Credit Counsellor or financial advisor, working with an LIT is the next step when you’re considering a consumer proposal or bankruptcy.
Debt Consultant
For a fee, a debt consultant will assess your current financial situation and may perform actions like:
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Negotiating with creditors on a case-by-case basis to request payment or settlement terms.
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Enlisting the help of an LIT or nonprofit Credit Counsellor.
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Putting you in touch with a lender (such as for a debt consolidation loan).
What you’re really paying for is getting someone to do the footwork of finding a debt relief solution. If you’re already overwhelmed and don’t want to (or can’t) do the research yourself, a debt consultant might be useful.
However, reaching out to a nonprofit credit counselling agency or an LIT agent directly can help cut out the middleman and save you both time and money.
Money Coaches and Financial Advisors
A money coach (often referred to as a financial coach) is a personal finance expert who provides one-on-one coaching to help you meet a specific financial goal. While their money coaching services aren’t typically focused on providing debt help advice, their coaching can sometimes be useful for getting or staying out of debt.
Money coaches may help you tackle debt as part of achieving your financial goals. In most cases, money coaches are better suited for preventing debt by providing advice than they are for providing debt relief services. These coaches operate as for-profit entities, and their fees will vary depending on the consultant.
A financial advisor is similar, but focuses on advice for investing your money. Their services are mostly meant for those who have already gotten out of debt.
A money coach or financial advisor isn’t usually a good option for someone seeking debt relief advice or services, as they may be too pricey.
Another option is to join a financial coaching program like Credit Canada GOLD, which is offered at no cost to participants. This program empowers you to change your relationship with money and make immediate, sustainable, long-term changes to get you out of debt and stay out.
Summary of Debt Relief Solutions
Here is a brief summary of each debt management option:
Solution |
Provider |
Best For People Who… |
Credit Risk |
Cost |
Debt Consolidation Loan |
Banks, credit unions, private lenders |
Have good credit scores and income, and may qualify for lower interest rates |
Low to Medium risk – payments made on time may improve credit, but missed payments will hurt credit. |
Payable interest + possible loan admin fees |
Debt Consolidation Program |
Non-profit credit counselling agency |
Don’t qualify for a debt consolidation loan or have poor credit |
Moderate to High impact – reported as R7; voluntary, may be resolved faster if finances improve |
Low setup and administrative fees, but savings on interest |
Consumer Proposals |
Licensed Insolvency Trustee |
Have overwhelming debt, don’t qualify for the options outlined above, and need legal protection from creditors |
Moderate to High impact – reported as R7; formal legal process with less flexibility |
$1,500 plus 20% of future payments |
Bankruptcy |
Licensed Insolvency Trustee |
Have no other viable options |
Very High impact – reported as R9, the most severe rating. |
$1,800 - $2,300 |
How to Spot a Trustworthy Debt Relief Provider
Regardless of what kind of debt advice service you want to use, there are a few things you should look for in someone who provides that advice.
1. Check for Industry Accreditation
One of the first things to look for is whether the advisor has any kind of accreditation from an independent organization. For example, Credit Canada is an accredited member of Credit Counselling Canada (CCC).
Accreditation is important for ensuring that the person you work with will uphold industry standards for quality and ethics. A non-accredited “advisor” may not be accountable for bad advice. There are also many “credit repair companies” that claim they can repair your credit and solve your debt problems quickly. It’s important to be aware of companies that promise quick fixes. If it sounds too good to be true, it probably is.
Additionally, it may be helpful to verify the specific financial qualifications of the advisor you will be working with to ensure you receive the best support possible.
2. Confirm Whether They Are Non-Profit or For-Profit
If the person providing your debt advice is getting paid, it’s important to know how they’re paid. If there is a conflict of interest—such as they get a commission for selling certain financial products—that could affect the quality of advice you receive.
3. Read the Advisor’s Business and Google Reviews
One of the best ways to discover how well a debt relief service provider or financial advisor will treat you is to read reviews from their other clients. Debt counsellors who provide top-quality service tend to gather positive reviews. However, a large number of negative reviews may be a good indication that you should stay away from a certain advisor. Look for a positive rating with Google or TrustPilot.
It also helps to check if they’re registered with the Better Business Bureau (BBB) and to confirm their rating before signing up for debt help. For example, Credit Canada has an A+ rating with the BBB.
Choosing the Right Debt Solution for You
What’s the best way to pay off debt? To choose the right debt solution, ask yourself these questions:
- How much debt do I actually have, and how long will it take to pay it off realistically? (Hint: Use a Debt Calculator to answer this question).
- What’s my current credit score? Could I qualify for new credit?
- Is my income stable?
- What assets do I need to protect?
- How important is it to me to protect my credit rating versus becoming debt-free quickly?
Get Help Now: Free, Confidential Advice from Credit Canada
Getting back on solid financial ground isn’t out of reach. If you’re worried about your debt and need help to understand your options for financial recovery, book a free, confidential call with a trusted non-profit credit counselling agency like Credit Canada.
For almost 60 years, our team has proudly guided over 2 million Canadians through difficult financial times. Here’s what some of them had to say on TrustPilot.
We want to help you, too! Contact us or call 1 (800) 267-2272 to speak with one of our compassionate, certified Credit Counsellors. Or, chat with Mariposa, our AI-powered debt management agent, to get personalized advice when it’s most convenient for you.
FAQs About Debt Relief in Canada
What Is the Best Debt Relief Option in Canada?
The best debt relief option in Canada depends on many factors, including how much debt you have, your income or ability to pay it off, and the types of debt (secured or unsecured). You should discuss your detailed finances with a financial or debt advisor to understand your options.
Can I Get Help With Credit Card Debt?
To manage or pay off credit card debt, one option you may want to explore is a balance transfer (and other qualifying loan balances) to a lower-interest loan (such as a line of credit). You may also qualify for a debt consolidation program, consumer proposal, or bankruptcy as a last resort. Speak with a certified Credit Counsellor to get personalized debt management advice and review your options.
What’s the Difference Between Credit Counselling and a Consumer Proposal?
One of the most common misconceptions is that the two debt assistance programs are the same. While both involve structured payment plans over a set period, the amount owed is different.
Credit counselling is usually the first step for anyone looking to address their debt and may include one-on-one counselling, educational resources, and debt consolidation programs. Consumer proposals are a legally binding agreement between you and your creditors, facilitated by a Licensed Insolvency Trustee (LIT).
Are Debt Relief Programs Free?
Some debt assistance programs do have a cost or fee associated with them. Both Debt Consolidation Programs and filing for consumer proposals or bankruptcy through a Licensed Insolvency Trustee involve fees. Private money coaches or debt consultants will usually also charge a fee.
Will Seeking Help Hurt My Credit Score?
Speaking with a non-profit Credit Counsellor, LIT, money coach, or financial advisor won’t affect your credit score. Entering into a formal program, such as a Debt Consolidation Program, consumer proposal or bankruptcy, will have an impact on it. A certified Credit Counsellor can help you understand the differences between these options.

Frequently Asked Questions
Have a question? We are here to help.
What is a Debt Consolidation Program?
A Debt Consolidation Program (DCP) is an arrangement made between your creditors and a non-profit credit counselling agency. Working with a reputable, non-profit credit counselling agency means a certified Credit Counsellor will negotiate with your creditors on your behalf to drop the interest on your unsecured debts, while also rounding up all your unsecured debts into a single, lower monthly payment. In Canada’s provinces, such as Ontario, these debt payment programs lead to faster debt relief!
Can I enter a Debt Consolidation Program with bad credit?
Yes, you can sign up for a DCP even if you have bad credit. Your credit score will not impact your ability to get debt help through a DCP. Bad credit can, however, impact your ability to get a debt consolidation loan.
Do I have to give up my credit cards in a Debt Consolidation Program?
Will Debt Consolidation hurt my credit score?
Most people entering a DCP already have a low credit score. While a DCP could lower your credit score at first, in the long run, if you keep up with the program and make your monthly payments on time as agreed, your credit score will eventually improve.
Can you get out of a Debt Consolidation Program?
Anyone who signs up for a DCP must sign an agreement; however, it's completely voluntary and any time a client wants to leave the Program they can. Once a client has left the Program, they will have to deal with their creditors and collectors directly, and if their Counsellor negotiated interest relief and lower monthly payments, in most cases, these would no longer be an option for the client.