Are there government grants to pay off debt?
Government grants to pay off personal debt do not exist in Canada. The federal government does not issue grants, rebates, or direct payments to help Canadians clear consumer debt, like credit cards, personal loans, or lines of credit.
What the government does provide is legislation that creates formal debt relief options. The Bankruptcy and Insolvency Act is the federal law that governs consumer proposals and bankruptcy in Canada.
Both are legal processes, not grants. They allow you to reduce or eliminate debt under court protection, but they come with consequences for your credit and, in the case of bankruptcy, your assets.
In the 12 months ending October 2025, consumer insolvencies in Canada increased by 1.7% compared to the previous year. 78.6% of those filings were consumer proposals rather than bankruptcies.
Source: Office of the Superintendent of Bankruptcy Canada – Insolvency Statistics, October 2025
Why “government debt relief grants” are misleading
If you have seen ads on social media promising “government-approved” debt relief or “free government grants” to wipe out your debt, be careful. These claims are misleading, and the companies behind them are usually unlicensed debt consultants.
How the scam works
These companies are not Licensed Insolvency Trustees. They cannot file a consumer proposal or a bankruptcy on your behalf. What they do is collect your information, charge you hundreds or thousands of dollars in fees, and then refer you to a Licensed Insolvency Trustee anyway. You end up paying for a service you never needed.
The Office of the Superintendent of Bankruptcy and the Canadian Association of Insolvency and Restructuring Professionals have both issued warnings about this. Unlicensed debt advisory firms charge fees for services they are not licensed to provide and often misrepresent what they can do.
Source: Government of Canada – Struggling with debt? Beware of debt-relief scams
How to protect yourself
You do not need a referral to speak with a Licensed Insolvency Trustee. The initial consultation is free, and Licensed Insolvency Trustees are the only professionals in Canada legally authorized to administer consumer proposals and bankruptcies.
You can verify credentials on the OSB’s public directory. If someone asks you to pay upfront before you have even met with a trustee, walk away.
Federal debt relief under the Bankruptcy and Insolvency Act
The Bankruptcy and Insolvency Act creates two formal debt relief options for Canadians with unmanageable unsecured debt. Both are administered by Licensed Insolvency Trustees and provide legal protection from creditors.
Consumer proposals
A consumer proposal is a legal agreement where you repay part of your unsecured debt over up to five years. Your Licensed Insolvency Trustee files the proposal with the Office of the Superintendent of Bankruptcy, and once a majority of your creditors (by dollar value) accept it, all creditors are bound by the terms.
Your payments are fixed from start to finish. Interest stops. Collection calls and wage garnishments stop the day the proposal is filed. You keep your assets.
A consumer proposal stays on your credit report for three years after you complete it or six years after you file, whichever comes first.
Bankruptcy
Bankruptcy is a last resort, but for some people it is the right one. When you file for bankruptcy, most unsecured debts are discharged. You get immediate protection from creditors. A first-time bankruptcy with no surplus income lasts nine months.
The trade-offs are real. You lose non-exempt assets (the exemptions vary by province). Surplus income payments apply if you earn above the government threshold. A first bankruptcy stays on your credit report for six to seven years, depending on the credit bureau. A second bankruptcy lasts for 14 years.
Bankruptcy is not a failure. It is a legal tool designed to give people who genuinely cannot repay their debts a clean start. No shame in that.
Canada Student Loan Forgiveness and repayment help
Student loan debt is the one area where the federal government does offer real financial relief. Two programs apply to federal student loans.
Repayment Assistance Plan (RAP)
The Repayment Assistance Plan adjusts your monthly student loan payments based on your income. If your family income is below a certain threshold, you do not have to make payments at all. You reapply every six months to stay eligible.
After 60 months on RAP (or 10 years after leaving school), the government starts paying down both the principal and remaining interest on the federal portion of your loan. For borrowers with a permanent disability, the RAP-D program covers principal and interest from the start.
Since April 2023, federal student loans no longer accumulate interest. That applies to loans currently in repayment too.
Source: Government of Canada – Repayment Assistance Plan
Canada Student Loan Forgiveness
The Canada Student Loan Forgiveness program forgives a portion of your federal student loan if you work in an eligible occupation in an eligible community (generally a community with a population of 30,000 or fewer).
As of December 31, 2025, the program expanded from doctors and nurses to include 10 additional occupations: dentists, dental hygienists, pharmacists, midwives, teachers, social workers, physiotherapists, psychologists, early childhood educators, and personal support workers. Depending on the occupation, you can receive between $15,000 and $60,000 in loan forgiveness over five years.
You must work at least 400 hours in person and complete a full year of service before you can apply. Applications for the new occupations are being processed by mail until the online system is updated in March 2026.
Source: Government of Canada – Canada Student Loan Forgiveness
Other debt relief options in Canada
Government-regulated insolvency is not the only route. Several other debt relief options exist, and the right one depends on how much you owe, your income, and whether you can realistically pay your debts in full.
Credit counselling and debt management plans
Credit counselling is an educational service offered by non-profit and for-profit agencies.
A credit counsellor reviews your budget, your debts, and your income, and helps you understand your options. The initial session is usually free.
If you can afford to repay your debts in full but need structure, a credit counsellor can set up a debt management plan. Under a debt management plan, the agency negotiates with your creditors to reduce or stop interest, and you make one monthly payment to the agency. You repay 100% of what you owe, but the interest savings can be large. Debt management plans typically last three to five years.
Debt consolidation loans
A debt consolidation loan replaces multiple debts with a single loan at a lower interest rate. You still owe the full amount, but you pay less interest and make a single payment instead of several.
To qualify, you generally need a reasonable credit score and stable income. If your credit is already damaged or your debt is too high relative to your income, a lender is unlikely to approve you.
A consolidation loan doesn’t reduce what you owe, so if the underlying spending problem is not addressed, you can end up in worse shape.
Debt settlement
Debt settlement involves negotiating a lump sum payment with your creditors for less than you owe. This can be done through a debt settlement company, but it carries real risk.
Creditors are not legally required to accept a settlement offer. Some debt settlement companies ask you to stop making payments while they negotiate, which damages your credit and can lead to lawsuits.
Unlike a consumer proposal, a debt settlement is not legally binding and offers no court protection. If you are considering settling for less than you owe, a consumer proposal is usually a safer and more predictable option.
How to choose the right debt relief option
The right option depends on your income, the total amount you owe, and your ability to repay. Here is how the main options compare.
| Option | Reduces debt | Stops interest | Legal protection | Credit impact | You need |
|---|---|---|---|---|---|
| Consumer proposal | Yes | Yes | Yes | R7 for 3 years after completion | Steady income, less than $250,000 in unsecured debt (excluding mortgage) |
| Bankruptcy | Yes (discharged) | Yes | Yes | R9 for 6 to 7 years (first filing) | Unable to repay debts as they come due |
| Debt management plan | No (100% repaid) | Reduced or stopped | No | R7 during plan | Ability to repay full amount |
| Debt consolidation loan | No (100% repaid) | Lower rate | No | Minimal if payments made | Good credit, stable income |
| Debt settlement | Partial (negotiated) | Varies | No | Negative | Lump sum available |
A Licensed Insolvency Trustee can review your full financial picture and tell you which options are realistic. The consultation is free, and there is no obligation.
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Frequently asked questions
Does the Canadian government give grants to pay off credit card debt?
No. The Canadian government does not give grants to pay off credit card debt or any other personal consumer debt. Companies advertising “government grants” for debt relief are misleading you. The only government-regulated debt relief options are consumer proposals and bankruptcy, both administered by Licensed Insolvency Trustees.
What is the difference between a consumer proposal and bankruptcy?
A consumer proposal lets you repay part of your unsecured debt over up to five years while keeping your assets. Bankruptcy discharges most unsecured debt but requires you to give up non-exempt assets and make surplus income payments if you earn above the threshold. A consumer proposal has a lighter impact on your credit report than bankruptcy.
Read more: Consumer proposal vs bankruptcy
Can I include tax debt in a consumer proposal?
Yes. Tax debt owed to the Canada Revenue Agency is unsecured debt and can be included in a consumer proposal. This includes income tax debt, HST/GST debt, and repayments of the Canada Emergency Benefit. A consumer proposal stops CRA collection action, including wage garnishments.
Is credit counselling free in Canada?
Most non-profit credit counselling agencies offer a free initial consultation. If you enrol in a debt management plan, there are fees, but they are typically built into your monthly payment.
Credit counselling agencies are not regulated by the federal government, so check that you are dealing with a reputable non-profit agency.
Who qualifies for Canada Student Loan Forgiveness?
You qualify if you work in an eligible occupation (including doctors, nurses, teachers, social workers, dentists, pharmacists, and others) in a community with a population of 30,000 or fewer.
You must have a Canada Student Loan in good standing and complete at least 400 hours of in-person service over a full year. The maximum forgiveness ranges from $15,000 to $60,000, depending on your occupation.
How do I know if a debt relief company is legitimate?
Licensed Insolvency Trustees are the only professionals licensed by the federal government to administer consumer proposals and bankruptcies. You can verify a trustee’s licence on the Office of the Superintendent of Bankruptcy’s online directory.
If a company asks for upfront fees, requires you to sign a service contract, or claims to offer “government-approved” debt grants, those are red flags.
Can I lose my house if I file a consumer proposal?
No. A consumer proposal allows you to keep all your assets, including your home. You continue making your mortgage payments as normal. This is one of the main reasons people choose a consumer proposal over bankruptcy.
What debts cannot be included in a consumer proposal or bankruptcy?
Secured debts, such as mortgages and car loans, are not included. Student loans are only dischargeable if you have been out of school for at least seven years. Child support, spousal support, and court-ordered fines are also not dischargeable.
How much does it cost to file a consumer proposal?
There is no upfront cost to you. The Licensed Insolvency Trustee’s fees are set by a government tariff and are paid out of the payments you make to your creditors through the proposal. You do not pay anything beyond your proposal payments.
What happens if my creditors reject my consumer proposal?
Your trustee can negotiate with creditors or amend the terms of the proposal. If creditors reject the proposal entirely, you still have other options, including filing an amended proposal or considering bankruptcy. A trustee will advise you on the best next step.
Talk to a Licensed Insolvency Trustee
If you are looking for government help with debt, the most important thing you can do is talk to a Licensed Insolvency Trustee directly. The consultation is free, confidential, and comes with no obligation.
A trustee will review your full financial situation and explain every option available to you, not just insolvency solutions. You do not need a referral, and you should never have to pay someone else to connect you with a trustee.