Understanding Debt Solutions in Canada

We know that even the thought of debt can bring on feelings of stress, emotional drain and fear. Debt is a single word what can overwhelm our overall well-being. If you are one of the many Canadians carrying debt, it is important to know you do not need to struggle alone. There are debt solutions available to help you regain control of your finances and work towards a debt-free life. You may be aware of some of the programs available to you, and others may be new to you.

debt solutions

With any option, it is important to do your research and weigh the pros and cons of your choice. This might mean enlisting the help of a professional, like a Licensed Insolvency Trustee. These individuals can help you understand your rights when it comes to debt relief in Canada. Continue reading to learn more about the debt solutions available to you in Canada!

Debt Consolidation

Debt consolidation involves combining multiple debts into a single loan, typically at a lower interest rate. This solution simplifies debt management by reducing the number of monthly payments and providing a clear repayment plan. Canadians can consolidate debt through personal loans, home equity loans, or balance transfers to a low-interest credit card. While debt consolidation can lower monthly payments, you will be responsible for the full debt including all interest fees that accumulate.

Consumer Proposal

A consumer proposal is a regulated debt settlement arrangement made with the help of a licensed insolvency trustee (LIT). It allows individuals to negotiate a repayment plan with creditors, often resulting in a reduced overall debt amount. Consumer proposals provide protection from creditors, stop collection calls, and allow for manageable monthly payments over a five year plan. You will be able to keep your assets, but your credit score will be affected. Not all debts are eligible for a consumer proposal and any debt not included in the proposal will be paid for by you, in full. 

Bankruptcy

Bankruptcy is a legal process that provides relief to individuals unable to repay their debts. It allows for the elimination or reduction of debt, offering a fresh financial start. Bankruptcy is administered through a licensed insolvency trustee, but unlike a consumer proposal, you may be required to liquidate your assets to pay off the accumulated debt. While bankruptcy can offer immediate relief, it has long-term consequences. This includes a negative impact on credit scores. It is important to know that you are able to start rebuilding your credit. But until you do, it may be more difficult to secure credit and you may be susceptible to higher interest rates in the meantime.

Related Reading: Consumer Proposal vs Bankruptcy: What’s the difference?

Negotiate with your Creditors

You have the right to an informal negotiation. In other words, you can directly contact your creditors to renegotiate repayment terms, such as lower interest rates or extended payment periods. This can be effective for individuals with temporary financial difficulties or manageable debt levels. However, success depends on the willingness of creditors to negotiate and may not be a viable option for everyone. To have the best terms, you should contact your creditors quickly, even before you have missed payments and be honest about your situation. Offer a plan that you can stick to. Be aware that if you do miss payments without contacting them going forward, there may be more severe penalties to consider.


When facing overwhelming debt, understanding the various debt solutions available in Canada is crucial. Debt consolidation, consumer proposals, bankruptcy, and negotiating with your creditors all provide unique benefits and considerations. Utilize professionals such as licensed insolvency trustees or debt counselors and choose a debt solution that works with your long-term goals. Remember, each case is unique, and what works for one person may not be right for someone else.

We know that debt relief may seem overwhelming, but we want you to know you do not need to handle this alone. We have supports in place to help you regain control of your finances, and set you up for a brighter, debt-free future. By choosing a Licensed Insolvency Trustee, like one at Bromwich+Smith, you can regain your financial freedom and get your finances back on track. Reach out today for a consulation!

Read More: DIY Debt Solutions

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