10 best debt relief companies in Canada

Worried your debts will never go away? Bankruptcy isn’t your only option. Debt relief companies can help you get back on your feet financially. We explain how debt relief works plus 10 of the best debt relief companies in Canada.

Best debt relief companies in Canada

Before we dive into the 10 best debt relief companies in Canada, consider whether a debt consolidation loan would be more appropriate for you.

A debt consolidation loan combines all your debts into a single, monthly payment with a lower interest rate. A great way to take back control of your finances, it also lets you avoid more drastic solutions like submitting a consumer proposal. Learn more in our guide to debt consolidation loans in Canada.

• How we chose the best debt relief companies in Canada

  We’ve chosen the debt relief companies on this page based on the providers available through Finder and online in the Canadian debt relief marketplace. These debt relief companies are not representative of the entire market.

  When choosing our picks for the best debt relief companies in Canada, we considered each provider’s services, fees, provincial availability, customer support and feedback, licenses and accreditations. No single debt relief company or debt relief option will be the best choice for everyone, so compare your options before applying.

1. Debt.ca

2. Consolidated Credit

3. Credit Counselling Society

4. Money Mentors

5. Credit Canada Debt Solutions

6. Solve Your Debts

7. Hoyes Michalos

8. Spergel

9. Sands & Associates

10. MNP Debt

How debt relief in Canada works

In Canada, “debt relief” refers to various solutions that help you get out of debt. Not just limited to bankruptcy, debt relief can also include financial counselling to help you better manage money or negotiating with creditors for lower repayment amounts or better interest rates.

Debt relief companies, which can be for-profit and not-for-profit, evaluate your financial situation to find the best debt relief option for your needs—whether through debt settlement, debt consolidation, credit counselling, submitting a consumer proposal or bankruptcy.

What are the best options for debt relief in Canada?

The best debt relief option in Canada for you depends on your financial situation. There are several helpful debt relief options for Canadians, so let’s take a closer look at how each of them works, how much they cost, and how they affect your credit score.

1. Debt consolidation loan

• How it works: A debt consolidation loan is designed to make your debt repayments easier to manage and more affordable. The basic premise is that you take out a loan to pay off all your existing debts. You then only have one debt to pay off — your new debt consolidation loan — with a single monthly payment, and a lower interest rate than your previous debts.
• How it affects your credit score: Your credit score will drop slightly when you apply for a debt consolidation loan because you’ll need to undergo a credit check. However, if your lender reports on-time payments to the credit bureaus, it can actually improve your credit score in the long run.
• Cost: APRs of up to 46.96% depending on your credit score and income.

2. Debt management program

• How it works: A debt management program allows you to consolidate your outstanding debts into one affordable monthly payment. A debt relief company or credit counselling agency can negotiate with your creditors on your behalf, and while you’ll still need to pay back the debt in full, you typically will only have to pay low or no interest. You then make your monthly payment to the debt relief service or counselling agency, which distributes the money to your creditors.
• How it affects your credit score: A debt management plan will have a negative impact on your credit score. However, you can take steps to improve your credit once you get out of debt.
• Cost: Fees are calculated based on the debt amount and your financial situation. For example, the Credit Counselling Society has a sliding fee scale, with a maximum fee of $75 per month. The fee is included as part of your monthly payment.

3. Debt settlement

• How it works: A credit counsellor or debt relief company negotiates with creditors on your behalf to pay off less than what you owe. However, creditors may refuse to settle your debts, while you’ll also need to watch out for high fees that may apply. Learn more on the Government of Canada website.
• How it affects your credit score: Debt settlement will have a significant negative impact on your credit score and will stay on your credit report for six years after you finish the program.
• Cost: Fees commonly range from 15% to 25% of the debt settlement amount.

4. Consumer proposal

• How it works: A consumer proposal is a legally binding agreement you enter into with your creditors to pay back less than what you owe, increase the amount of time you have to pay back your debts, or both. The agreement is administered by a licensed insolvency trustee, but creditors have the right to reject your proposal.
• How it affects your credit score: A consumer proposal will have a significant negative impact on your credit score and will stay on your credit report for three years after you make your final payment. You’ll also find it harder to get a loan after a consumer proposal.
• Cost: Filing fee ($100), counselling fees (2 sessions X $85), proposal administration fee ($1,500 + 20% of creditor distributions) and a levy of 5% of creditor distributions.

5. Bankruptcy

• How it works: Filing for bankruptcy is a legal process administered by a licensed insolvency trustee. The process takes 9-21 months and you’ll stop making payments to your creditors for any unsecured debts. Once you’ve declared bankruptcy, the trustee will sell your assets to pay your creditors, and a portion of your income will be paid to the trustee so they can distribute it to your creditors.
• How it affects your credit score: Your credit score will drop to the lowest possible level. Bankruptcy will stay on your credit report for up to 6-7 years after you’re discharged from bankruptcy.
• Cost: Approximately $1,800 in fees.

Is it a good idea to use a debt relief company?

If you’re looking for helpful debt relief for Canadians, negotiating debt settlement with your creditors can be risky because it’s not guaranteed that they will agree to lower rates or payments. Your creditors are not required to negotiate your debt, and if you stop making payments to them — as some debt settlement companies recommend — you could run into a lot of trouble, and find yourself in court.

A debt relief company can be helpful for Canadians legitimately struggling with debt and considering bankruptcy. If you’ve experienced a legitimate financial hardship, such as unemployment or a medical emergency, the company could suggest other avenues you haven’t considered. It may also be possible to keep assets that would otherwise be sold if you filed for bankruptcy.

How do I pick the best debt relief option?

A debt consolidation loan may be a suitable option if the following applies to you:

• You have multiple outstanding debts.
• You’re struggling to keep track of and afford all your monthly payments.
• You can get a lower interest rate and fees with a debt consolidation loan than what you are currently paying.
• You will be able to afford the monthly payments toward your debt consolidation loan.

A debt management program may be a helpful debt relief option if the following applies to you:

• You can’t qualify for a suitable debt consolidation loan.
• You have multiple unsecured debts and you are struggling to make on-time payments.
• You don’t need to apply for new credit while you’re in the debt management program.

A debt settlement program may be a suitable option if the following applies to you:

• You’re struggling to make regular, on-time debt payments.
• You don’t think you’ll ever be able to pay off all your debts.
• You have access to enough money to pay the debt settlement amount.

A consumer proposal may be a helpful option if the following applies to you:

• You are insolvent (you cannot make your payments or your debts are greater than your assets).
• You can’t afford to pay back the full debt amount.
• You have unsecured debt of $1,000 – $250,000.
• You want to hold onto your assets.

Bankruptcy may be a suitable option if the following applies to you:

• You’ve considered all of the above options for debt relief in Canada.
• Your monthly debt payments are greater than your monthly income.
• You are unable to make on-time payments.

Seek advice from a credit counsellor to figure out which of the above choices is the best debt relief option for you.

What does it take to qualify for debt relief in Canada?

Eligibility criteria vary depending on the option for debt relief in Canada you choose. For example, any Canadian who is struggling with debt can access credit counselling to get advice on the options available to them. If you’re committed to paying back what you owe and you have sufficient income, the counsellor may recommend that you enroll in a debt management program.

The next helpful debt relief option for Canadians may be debt settlement. As a general guide, this option may be worth considering if you have at least $10,000 in unsecured debt. You’ll also need to show that you have enough income to cover payments, and that you have savings to help pay off the settlement amount.

As a consumer proposal is a legally binding agreement, it has more formal eligibility requirements. To qualify you must:

• Be insolvent
• Owe between $1,000 and $250,000 in unsecured debt (excludes your mortgage)
• Have enough income to repay according to the proposal terms
• Work with a Licensed Insolvency Trustee
• Not have any other current consumer proposals (completed past proposals are acceptable)
• Be a Canadian resident or citizen

To file for bankruptcy you must:

• Owe $1,000 or more in unsecured debt
• Be insolvent

How to spot an illegitimate debt relief company

While there are plenty of legit debt relief companies in Canada, unfortunately there are also some sketchy providers that prey on people experiencing financial hardship. That’s why it’s important to be able to recognize the warning signs that could indicate a company offering debt relief in Canada is not above board, such as:

• It charges an upfront fee for its services. Most legit, helpful debt relief companies won’t ask for fees upfront or all at once, preferring steady payments toward settlement accounts and services.
• It makes promises that sound too good to be true. If a debt relief company guarantees a specific amount of debt savings, or promises to solve all your problems without first assessing your financial situation, this is a red flag that could indicate a debt relief scam.
• It pressures you to sign up. Be wary of high-pressure sales tactics that try to encourage you to sign up as soon as possible.

It’s possible to avoid a scam by doing some research. When researching a debt relief company, ask yourself:

• Does it have a good reputation? Head to the Better Business Bureau (BBB) website to see if the company has any complaints against it.
• How long has it been around? While not always the case, older and more established businesses feel less pressure to engage in unsavoury business practices to stay afloat.
• What’s the website like? Can you find answers to most of your questions with a few clicks? Is it clear what services it provides, and is that information consistent? If you find yourself frustrated online, you might find more frustration with the company itself.
• How much control will you have over your money? Debt settlement companies in particular work by having you pay into an account from which the company then pays your debt settlement fee.
• What types of debts does it settle? Established debt relief companies can settle specific types of loans and even some unsecured debt, but most only handle such basics as unpaid bills, personal loans and credit cards.
• What timeline does it advertise? Typically, debt settlement programs take two to four years. Try to avoid longer terms — it increases your risk of facing trouble with your creditors.
• How did you hear about them? If the company solicited you for its services, make sure advertised promises are true. Otherwise, it’s not following government regulations.

I signed up for debt relief in Canada. Now what?

5 ways you can make debt relief in Canada worth it

1. Avoid taking on more debt. It might be difficult to avoid spending if you’re enrolled in a debt relief program, but many companies require you to close your accounts.
2. Watch your credit score and report. Know what to expect, and monitor your credit report for any irregularities. In general, debt settlement programs can cause your credit to take a dive. Debt management shouldn’t greatly affect your score, but you might see a line on your report indicating you’re paying off a debt through credit counselling.
3. Continue paying your creditors. If you have the means, continue to make at least your minimum payments to keep interest and late fees from piling up — not to mention to keep harassing calls from collection agencies or potential lawsuits at bay.
4. Make sure everything adds up correctly. Do your fees match up with your original agreement? If you see anything out of the ordinary, call your debt relief company.
5. Take advantage of free resources. Credit counselling agencies and other debt relief companies often provide tools to help you stick to a budget or rebuild your credit score. Use them to get back on track and identify your financial issues.

DIY debt solutions

Not ready to pursue debt relief in Canada, but can’t qualify for a debt consolidation loan? You have a few DIY debt solutions to help you get out of debt sooner.

• The avalanche method. Pay off your debts by tackling the ones with highest interest first. If you don’t know what your highest interest debt is, it’s usually the one whose full balance is due the soonest. You could end up saving a lot of money, especially on shorter-term loans that build up fast if you don’t stop them quickly.
• The snowball method. Get quick wins by clearing your smallest debts first. The advantage is that smaller loans won’t get a chance to grow into bigger, unmanageable loans, simplifying your debt. However, it could cost more in the long-term than if you were to use the avalanche method.
• Negotiate with your creditors. Your debt company might tell you it’s best to leave negotiations to the professionals. However, it is possible for you to call up your creditors yourself. If you’re candid about your situation, they might be willing to reduce your interest rate, your principal or even settle. Be firm about what you can afford, and escalate the call until you reach somebody who can help.

Bottom line

Debt relief companies in Canada provide many solutions to help you get out of debt, including credit counselling, debt settlement, consumer proposals and bankruptcy. Companies offering “relief” often deal with debt settlement. Credit counselling agencies assess your financial situation to find the best debt relief solution for you.

Frequently asked questions about debt relief in Canada

• What is the best solution for debt?

  Unfortunately, there's no best, one-size-fits-all debt solution for every situation. For some people, a debt consolidation loan might be the best option to get them back on the right track with their finances. Others will have to look into more serious options for debt relief in Canada, like debt settlement or a consumer proposal.

• Is there a government debt relief program in Canada?

  No, the federal government does not operate a debt relief program. If you're searching for debt relief services, you might want to consider contacting a credit counselling agency or debt relief company.

• How long until debt is forgiven in Canada?

  The time period for debt forgiveness depends on the debt relief method you choose. If you file a consumer proposal, debt is forgiven once you make your final payment. If you declare bankruptcy for the first time, it can take between 9 and 21 months.

• Can I ask for debt forgiveness?

  There are 2 legal options for debt forgiveness in Canada: a consumer proposal and bankruptcy. Both are administered by a Licensed Insolvency Trustee, and both can have a significant negative impact on your credit score.

• What do I say to creditors if I can't pay?

  If you're struggling to pay off a debt, contact the creditor to explain your financial situation. Be upfront and honest about how much you think you can afford to pay, and see whether they'll be willing to work with you to find a reasonable solution.

• Can I do debt relief myself?

  Yes. From managing your budget, paying down debts and even taking out a debt consolidation loan, there are several DIY debt relief options in Canada. You can also contact your creditors to negotiate a debt settlement — it may seem like a daunting step to take, but it'll allow you to avoid paying fees to a debt relief company.

• Can I use my credit cards after I've sought debt relief?

  It depends on the type of debt relief you're participating in. Talking with a credit counselling agency shouldn't affect your ability to use existing credit cards, but a debt settlement and management program might require you to cancel your credit cards or could result in credit card companies cancelling your cards.

  You might be able to apply for additional cards after you've finished your debt relief program, but you won't be able to use your old ones. You may then want to consider secured credit cards designed to help you rebuild your credit score.

• Can a debt relief company help me with loans I've defaulted on?

  Possibly. If you've recently defaulted on a personal loan, a debt relief company may be able to help you get out of default and begin making on-time payments again. If your loan is in collections, the company may be able to help you negotiate a settlement.

Written by

Tim Falk

Writer

Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio