Compare All Debt Relief Options
There are six main ways to deal with unmanageable debt in Canada. Each has different costs, timelines, and trade-offs. Understanding these differences is the most important step you can take before talking to anyone.
| Option | Typical Cost | Timeline | Credit Impact | Legal Protection | Assets |
|---|---|---|---|---|---|
| Consumer Proposal(Canada only) | 20-50% of total debt | Up to 5 years | R7 rating for 3 years after completion | Yes — stays of proceedings | Keep all assets |
| Bankruptcy | $1,800+ (first-time, no surplus) | 9-21 months (first time) | R9 rating for 6-7 years after discharge | Yes — automatic stay | Provincial exemptions apply |
| Debt Consolidation | Interest on consolidated loan | 2-5 years | Minimal if payments are on time | No | May require collateral |
| Credit Counseling | Reduced interest, small monthly fee | 3-5 years | R7 rating during plan | No | Keep all assets |
| Debt Settlement(Primarily US) | Negotiated lump sum (typically 40-60%) | 2-4 years | Significant negative impact | No | Keep all assets |
| Debt Management Plan | Full principal, reduced interest | 3-5 years | R7 rating during plan | No | Keep all assets |
Consumer Proposal
Best for: Debts over $10,000 with assets to protect
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Bankruptcy
Best for: Overwhelming debt with limited income/assets
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Debt Consolidation
Best for: Good credit, manageable debt, multiple payments
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Credit Counseling
Best for: Moderate debt, need structured repayment
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Debt Settlement
Best for: Lump sum available, want to avoid bankruptcy
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Debt Management Plan
Best for: Want to repay in full with lower interest
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Frequently Asked Questions
What is the difference between a consumer proposal and bankruptcy?
A consumer proposal lets you negotiate to repay a portion of your debt (typically 20-50%) over up to 5 years while keeping all your assets. Bankruptcy eliminates most debts but may require surrendering non-exempt assets and has a longer credit impact (6-7 years vs 3 years). Consumer proposals are only available in Canada.
Which debt relief option has the least credit impact?
Debt consolidation has the least negative credit impact because you are taking a new loan to pay off existing debts — no missed payments, no insolvency filing. Credit counseling and debt management plans show as R7 during the plan. Consumer proposals also result in R7 but only for 3 years after completion.
Can I choose which option to use?
Yes, but eligibility varies. Consumer proposals require unsecured debts under $250,000 (excluding mortgage) and enough income to make payments. Bankruptcy has no debt minimum. Debt consolidation requires good enough credit to qualify for a loan. A Licensed Insolvency Trustee can assess which options are available to you — initial consultations are free.
Not sure which option is right for you?
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