Are There Free Canadian Government Grants to Pay Off Debt?

When debt feels like it’s taking over, it’s natural to hope there might be a quick fix, like a government grant that clears everything away.

It sounds amazing, right? Unfortunately, there aren’t any free Canadian government grants designed to pay off personal debt. What you do have access to, though, are government-regulated debt relief programs that can actually protect you and give you a way forward.

Let’s take a closer look at what’s truly available and how to steer clear of the scams along the way.

Government-Regulated Debt Relief Programs

While there aren’t government grants to erase debt, there are legal programs in Canada designed to help you lower or erase what you owe.

However, these programs are only available through a Licensed Insolvency Trustee (LIT), the professionals authorized by the federal government to administer debt relief.

Consumer Proposals

If you’re looking for a structured way to deal with debt without losing everything you own, a consumer proposal might be the answer.

• It’s a legal agreement filed through a Licensed Insolvency Trustee (LIT)
• It can reduce your unsecured debt by up to 80%
• It stops wage garnishments, lawsuits, and collection calls immediately
• It lets you keep your assets while making a single, affordable monthly payment for up to 5 years

In 2025, consumer proposals remain the most popular formal debt relief option in Canada, with creditors continuing to accept them at record-high rates.

Bankruptcy

When a proposal isn’t realistic (or creditors won’t agree), bankruptcy becomes the fallback option.

• It’s federally regulated process that eliminates most unsecured debt
• It typically lasts 9–21 months for a first bankruptcy
• It includes provincial exemptions so you can keep certain assets
• It appears on your credit report as an R9 rating

Bankruptcy is a last resort, but for some people it provides the fastest way to reset financially.

Alternative Debt Relief Options in Canada

Outside of consumer proposals and bankruptcy, you may also hear about other ways to manage debt. These options can work for some Canadians, depending on your income, credit, and overall financial situation:

Debt Consolidation

This combines multiple debts into one loan, often at a lower interest rate. It works best if you have a steady income and decent credit, but keep in mind: consolidation doesn’t reduce your debt, it just restructures it.

Credit Counselling / Debt Management Plans

Credit counselling agencies step in to work with your creditors, often reducing interest and rolling everything into one monthly payment. It’s a straightforward way to make debt easier to manage—but keep in mind, you’ll still be paying back the full balance.

Most plans run for 3–5 years and will show up on your credit report.

Debt Settlement

This involves negotiating with creditors to settle for less than the full balance. It’s risky if done outside of an LIT because fees can be high, interest may continue to build, and you could still face collection actions. If you’re considering settlement, make sure it’s through a licensed professional.

How to Avoid Debt Grant Scams

Unfortunately, many companies try to prey on Canadians looking for relief by advertising “free government grants to pay off debt.” These offers are scams.

Here’s how to spot red flags:

• Promises of guaranteed “government grants” to clear your debt
• Requests for upfront fees before offering any help
• High-pressure sales tactics that rush you into signing contracts
• Consultants who are not Licensed Insolvency Trustees

The Office of the Superintendent of Bankruptcy (OSB) has issued repeated warnings about unlicensed debt consultants. Always confirm you’re working with a government-licensed professional.

Do You Qualify for Government-Regulated Debt Relief?

You might benefit from a consumer proposal or bankruptcy if:

• You’re struggling to keep up with monthly payments
• Collection calls or wage garnishments are happening
• You’ve missed payments and can’t see a way to catch up
• Your debt feels unmanageable despite budgeting

Eligibility depends on your income, assets, and the total amount of debt you owe. The good news? Talking to an LIT is free, confidential, and comes with no upfront fees.

Seek Professional Guidance

At Farber, our Licensed Insolvency Trustees help Canadians every day explore the right government-regulated debt relief options.

Whether it’s a consumer proposal, bankruptcy, or another Canadian debt solution, we’ll walk you through your choices and create a plan that actually works for you.

Book your free consultation today to explore the real alternatives to debt grants in Canada and get a clear path toward debt freedom.

FAQ

Does the Canadian government provide free grants to pay off personal debt?
No. There are no free Canadian government grants to pay off personal debt. Instead, government-regulated options like consumer proposals and bankruptcy are available through Licensed Insolvency Trustees.

What government debt relief programs are available in Canada?
The main federally regulated options are consumer proposals and bankruptcy. Both are legal processes handled by LITs and offer protection from creditors.

Can a consumer proposal reduce my debt legally?
Yes. A consumer proposal is a legal agreement that can reduce your unsecured debt by up to 80% while protecting your assets.

How do I know if I qualify for government-regulated debt relief?
Eligibility depends on your income, total debt, and assets. If you’re struggling with payments or facing collections, a free consultation with an LIT can confirm your options.