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The only exception to this is student loans. In some cases, the government will reduce the amount of debt you owe on your student loans and delay your payments. This can help you catch up on your payments in the short term. You may see things online, though, that contradict this.
How Debt Forgiveness Works
Essentially, debt forgiveness is simple. It’s when all or part of your debt has been written off. This process is typically not facilitated by the government but between the creditor and the borrower. While there aren’t any specific programs for this in Canada, it doesn’t mean that the creditors won’t offer the ability to do this.
Free Canadian Government Grants To Pay Off Debt
In Canada, there are no grants to pay off debt. While there are ways to manage your debt and make your debt repayment simpler while reducing your debt problems, the government doesn’t offer them. These are offered through credit counselling agencies. The credit counselors offer options throught the bankruptcy and insolvency act to create a debt management program that works for you.
Government Approved Debt Relief Programs
As mentioned, there are no government programs available to help pay off debt when you owe money. However, there are steps you can take to get debt relief and regain your financial stabillity. These debt relief options are Consumer Proposals and Bankruptcy. They can help you become debt free, reduce your monthly payments and even avoid losing valuable assets.
Consumer Proposal
Consumer proposals are a way for you to legally reduce your debt and improve your financial situation. It’s an agreement between you and your creditors, including banks, credit unions and private lenders, and it’s all done through a Licensed Insolvency Trustee. You and the trustee work together to determine what amount is reasonable for you to pay back. Once this plan has been signed off by the creditors, then your debt management plan will be put into place.
However, in order to qualify for these debt relief services, you do have to meet some conditions. The minimum debt amount required is $1,000, and the maximum amount is $250,000 in unsecured debts. This increased to $500,000 for a married couple. The maximum amount of time you can take to make the payments is 60 months.
However, when going to credit counselling and considering a consumer proposal, it’s also important to consider the cost. While all of your interest fees will freeze, you do still have to pay for the consumer proposal itself, which is $1,500 and 20% of your payments. It also has a negative impact on your credit score. On top of that, not all debt is eligible. Eligible debt includes:
- Credit cards
- Lines of credit
- Personal Loans
- Collections
- Payday Loans
Bankruptcy
Another way people can find debt relief from their financial statements is through bankruptcy. While most people may have heard of bankruptcy before, they may not know how it works. In simple terms, it's a way to relieve most of your debt. However, there are some conditions that go along with bankruptcy and how you end up claiming since the bankruptcy process is a legal process. Before we go too much into that, though, here are the three different types of bankruptcy:
- Voluntary Assignment
- Involuntary Assignment
- Deemed Bankruptcy
The first type of bankruptcy, voluntary assignment, is where you choose bankruptcy yourself. In this case, you make an assignment of your assets for the benefit of the creditors. With involuntary assignment, the creditors initiate the bankruptcy process because you’re unable to pay your debts back. Lastly, deemed bankruptcy is when someone who started the insolvency process has failed to meet or adhere to the requirements.
Just like a consumer proposal, bankruptcy has a negative impact on your credit report. It takes years before it falls off, and it can be really difficult to improve your credit score. That said, it isn’t impossible. Plus, in many cases you can keep your home, and your income will not be garnished. It’s not always the ideal choice, but if you need to, it can really help.
Debt Consolidation Loans
If you’re looking to relieve your debt without actually writing it off, then a good option is a debt consolidation loan. This loan essentially pays off all of your debts, so everything is combined into one monthly payment and one interest rate.
It doesn’t seem like it makes a difference, but it can reduce your debt payments by hundreds of dollars per month and make paying off your debt much more affordable. You can even improve your credit score in the process. Sometimes, finding a way to save money while paying your debt faster can provide as much financial relief as making lump sum payments. If it’s possible to take this option, not only can you improve your overall financial health, but you can start to imporove your financial future.
Credit Card Debt Forgiveness Canada
Whether or not you can get your credit card debt forgiven is essentially up to the creditor. This often happens in the case of a consumer proposal or if the credit card collections department keeps hounding you to pay your balance. If you’re unable to do so, they may find it more worthwhile to forgive your debt instead of selling it off to collections.
However, if it does get sold to collections, it’s also a possibility to get it written off or at least part of it.
Is Debt Relief Canada Legitimate?
Debt Relief Canada isn’t an actual debt relief program; it’s a site that helps those looking for debt relief go through a consumer proposal. While consumer proposals do help to relieve Canadians of some of their debt, it isn’t a government-funded program.
Provincial Debt Forgiveness Programs
While there are no federal government debt relief programs, there are provincial debt forgiveness programs that are available to some to help reduce financial distress. These student loan forgiveness programs are similar to the federal one where part of your total debt is forgiven.
British Columbia
In BC, if you have a student loan, there’s the BC Loan Forgiveness Program. Those who have recently graduated from post-secondary education and are going into in-demand job fields can qualify for loan forgiveness. With this program, up to 20% of your provincial-federal student loan will be covered for up to 5 years. This is on top of any government student loans forgiven.
Alberta
While Alberta doesn’t have a provincial debt forgiveness program for student loans, they do have something else called the Repayment Assistance Plan. In order to qualify for this, there are three different requirements that you need to meet:
- Be currently repaying an Alberta or Canada student loan
- Be having difficulty when you make your payments
- Be out of school at least 6 months
With stage 1 of this program, you get help with temporary assistance in making your minimum payments. If help with repayment is still needed then you could qualify for stage 2 which could help for long term loan payments.
Saskatchewan
In Saskatchewan, nurses and nurse practitioners can get partial debt forgiveness for those who choose to work in remote areas. This program can provide up to $20,000 in debt forgiveness on your provincial portion. If you get approved for this amount, then it will automatically be applied to your student loan balance.
Ontario
In Ontario, there’s no debt forgiveness for student loans. That said, there is the OSAP program. It’s also referred to as the Ontario Student Loan Rehibillitation Program. The purpose of this program is to bring your student loans back into good standing after having outstanding debts on your loan.
The great thing about this program is that it also allows you to select the best rehabilitation program to catch up on your payments. That said, in order to get accepted into this program you do have to meet the eligibility requirements. These include:
- Having defaulted on any Ontario student loans
- Having at least $600 in outstanding principal payments
- Having less than 2 attempts to rehabilitate your loan
Federal Debt Relief Programs
While there aren’t really any debt relief programs, the government does offer the ability to offer relief to some who have federal student loans. They offer this ability to those who are nurses, doctors, nurse practitioners, or another medical practitioner working in what is considered to be an underserved or rural community.
Doctors can receive up to $60,000 on the government portion of Canada student loans, while nurses can receive up to $30,000. This is on top of all provincial amounts that you could get approved for as well.
Writing Off Debt In Canada
When it comes to writing off your debt in Canada, it can only really be done through a consumer proposal or a creditor. It’s not often that your debt will be written off in Canada unless you file for a consumer proposal or bankruptcy.
Are There Loan Forgiveness Options?
In Canada, there are only loan forgivenes options for certain student loans in the medical field. Other than that, the only options are debt consolidaton loans, consumer proposals and bankruptcy.
How Collections Work in Canada
Collections are a controversial topic in Canada. What often happens is when a you don’t pay your debt in a certain amount of time, the debt collection agencies, also referred to as a debt settlement companies, will try to recover that debt. This can be done in one of three ways:
- The lender using their own debt collections department
- The lender hiring a debt collection agency
- The lender selling your debt to a collection agency
No matter which way your debt goes to collections, though, it will end up on your credit report. It won’t disappear if you pay the debt either. It stays on your credit report for an allotted amount of time.
When a debt collection agency is looking to get money from you, they’re looking to come up with apayment plan for you to pay off the debt. That said, sometimes they’re looking for you to pay off the debt as fast as possible. If this is the case, they may offer you a reduced amount in order to get the debt paid off faster. If you’re working with a licensed trustee, the debt may even get written off all together. It’s important to remember though that debt reduction isn’t common outside of a consumer proposal since creditors don’t usually prefer to forgive debt and would rather an alternative debt solution.
Unpaid Debt After 7 Years
While unpaid debt doesn’t fall off your credit report after 7 years, your collects will. These fall off your TransUnion credit report after 7 years whether they’re paid or not. That said, while the collections are on your credit report it will specify whether the collections are paid or unpaid. The affect it has on your credit report, though, won’t change.
Final Thoughts
You may see lots of sites and adds regarding debt forgiveness in Canada, but there’s no programs the forgive your debt. The closest thing is the provincial and federal programs that write off student loan debt in certain field in certain areas of the country. Other than that, the only what to reduce your devt is through consumer proposal or bankruptcy.
While consumer proposal and bankruptcy are a great way to reduce your debt, they should only be used when you don’t have any other options. This is because it significantly reduces your credit score. Not only does it make it difficult to borrow money, but it can also make it difficult to get a job or rent a new place, even get a mortgage. That doesn’t mean that there isn’t a way, though, to control your debt and make your life easier.
