Why does everyone think this program exists?
Search for debt help, and you’ll see companies advertise “government debt relief” or “government-approved” debt relief programs.
Some of those ads are from Licensed Insolvency Trustee firms that are loosely describing a consumer proposal, which is a government-regulated debt solution. Some are debt-settlement companies advertising services they can’t legally provide.
None of these debt relief programs are directly offered by the government. However, a consumer proposal is created by federal law, regulated by the federal government, and filed by a Licensed Insolvency Trustee.
The closest thing to government debt forgiveness is a consumer proposal
A consumer proposal is the solution hidden beneath all the advertising. It’s a legally binding agreement filed through a Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act. You repay a portion of what you owe for up to five years, and your creditors forgive the rest.
Filing a consumer proposal provides legitimate debt forgiveness and is offered by your creditors under federal law, rather than originating from a government fund paying off your balance.
It stops collections, wage garnishments, and lawsuits by unsecured creditors, and freezes interest, too. It’s available to people whose debts, excluding their home mortgage, don’t exceed $250,000.
Source: Government of Canada – Bankruptcy and Insolvency Act
In the first quarter of 2026, 37,121 Canadians filed a consumer insolvency, the highest quarterly total since 2009. Of those filings, 29,545 (79.6%) were consumer proposals.
Bankruptcy is another legal process regulated by the federal government
Like a consumer proposal, bankruptcy is a legal process regulated by the federal government. It clears most unsecured debt, including credit cards, personal loans, and most tax debt. In exchange, you give up certain assets. You also complete required duties, including two credit counselling sessions.
A first bankruptcy with no surplus income is discharged after nine months. If you need to pay surplus income, it runs 21 months, and what you keep depends on your province’s exemption rules.
Source: Government of Canada – Bankruptcy and Insolvency Act
Deciding between a consumer proposal and bankruptcy depends on your income, assets, and the debts you owe. See our guide on a consumer proposal vs bankruptcy.
Genuine government debt relief programs
There are a few legitimate government programs that help with specific types of debt. None of them pay off credit cards or personal loans.
One such program is Canada Student Loan forgiveness, which offers actual debt forgiveness, but it applies only to federal student loans and is available exclusively to those working in certain professions in specific regions of Canada.
| Program | What it does | What it doesn’t do |
|---|---|---|
| Repayment Assistance Plan | Cuts federal student loan payments based on income, down to $0 | Doesn’t erase the loan balance |
| Canada Student Loan forgiveness | Writes off $15,000 to $60,000 of the federal loan over five years, depending on profession | Doesn’t cover provincial or private loans |
| CRA taxpayer relief | Cancels or reduces penalties and interest | Doesn’t reduce the tax you owe |
Student loan debt relief
The Repayment Assistance Plan reduces or eliminates your payments depending on your family size and income. Although it’s not truly debt forgiveness, the government will cover your loan payments for as long as you qualify, preventing the balance from increasing.
Source: Government of Canada – Repayment Assistance Plan
Canada’s student loan forgiveness program has specific criteria, with an expanded list of eligible professions introduced at the end of 2025.
Amounts vary by profession, ranging from $15,000 for personal support workers to $60,000 for family doctors over a five-year period. The program is limited to people working in rural areas and communities of 30,000 or fewer, and applications for the 10 new professions opened in March 2026.
Source: Government of Canada – Canada Student Loan Forgiveness
The federal program only applies to the federal portion of your loan. Six provinces also offer their own forgiveness programs for the provincial portion, with varying rules and amounts. Those are Newfoundland and Labrador, Nova Scotia, Quebec, Saskatchewan, British Columbia, and Prince Edward Island.
For more information on federal and provincial student loan programs, please refer to our student loan forgiveness guide.
If you’re insolvent, student loans can be discharged in bankruptcy or a consumer proposal if it’s been seven years since you last attended school. A hardship application may reduce this to five years, but approval is rare.
Source: Government of Canada – Bankruptcy and Insolvency Act, section 178
Tax debt and the CRA
The CRA’s taxpayer relief provisions can cancel or reduce penalties and interest if you face hardship or circumstances beyond your control.
You are still responsible for paying the tax owed. You can request relief on penalties and interest going back up to 10 years.
Source: Canada Revenue Agency – Cancel or Waive Penalties and Interest
CRA debt for income tax and GST/HST is usually unsecured, so it can be eliminated in a consumer proposal or bankruptcy. The exception is when the CRA has registered a lien against your property.
Learn more about CRA tax debt relief.
Is there a government debt consolidation loan?
No. The government doesn’t lend money to pay off consumer debt. It regulates the banks and credit unions that do, but it isn’t a lender itself.
A debt consolidation loan is a private product. You repay 100% of what you owe plus interest, and approval depends on a good credit score. If your credit score is poor, a lender will turn you away.
If that’s you, a consumer proposal is worth looking at instead. It consolidates your debts into one monthly payment, similar to a consolidation loan, but it also lowers the total you repay, and there’s no credit check. There are also other debt relief options that don’t require a good credit score.
Watch out for government debt relief ads
Only a Licensed Insolvency Trustee can file a consumer proposal or bankruptcy in Canada. Ads using government language are often a red flag. The Office of the Superintendent of Bankruptcy has warned that unregulated advisors charge fees, sometimes in the thousands, for services they can’t legally provide.
Often people pay a middleman for advice and a referral, and a trustee ends up doing the actual filing anyway. Skip the middleman and go directly to a Licensed Insolvency Trustee.
Source: Government of Canada – Struggling With Debt? Beware of Debt Relief Scams
Frequently asked questions
Does the government ever completely erase debt?
Debt can be eliminated through bankruptcy or a consumer proposal, both of which are legal processes under federal law, not through a government grant or fund. The government sets the rules and licenses the trustees who administer these debt solutions.
Is a consumer proposal a government program?
A consumer proposal is a legal process defined by federal law, not a government program. The Bankruptcy and Insolvency Act sets the rules, and the Office of the Superintendent of Bankruptcy oversees it. A Licensed Insolvency Trustee files the proposal for you.
Does a consumer proposal actually forgive debt?
When creditors accept your consumer proposal and you complete the payments, the remaining unsecured balance is legally forgiven. The rules are set by the Bankruptcy and Insolvency Act, and your creditors are the ones forgiving the balance.
Are there debts that cannot be forgiven?
Child support, alimony, court fines, and debts from fraud survive both a consumer proposal and bankruptcy. Secured debts, such as mortgages and vehicle loans, stay tied to the asset.
Is credit counselling a government debt program?
No, credit counselling agencies are private organizations, even if they are non-profits. A debt management plan repays 100% of what you owe with reduced interest. Nothing is forgiven, and a credit counsellor cannot file a consumer proposal or bankruptcy.
Can the CRA forgive tax debt?
Not the tax itself. The taxpayer relief provisions let the CRA cancel or reduce penalties and interest, going back up to 10 years if you face hardship or unforeseen events. Apply using Form RC4288 or your CRA My Account. Keep in mind that the original tax amount remains owed unless included in a consumer proposal or bankruptcy.
Does the Canadian government give grants to pay off debt?
There are no government grants that pay off regular debts, like credit card debt. Some provinces and cities offer emergency programs for rent or utility bills. Income support programs, like the GST/HST credit and the Canada Child Benefit, can help if you file your taxes.
Who can legally file a consumer proposal or bankruptcy in Canada?
A Licensed Insolvency Trustee, and nobody else. Trustees are the only professionals in Canada licensed to file either process. The first consultation is free.
What to do next
If you’re considering any of these options, talk to a Licensed Insolvency Trustee. The consultation is free, and you’ll leave knowing which options are right for you and what each one costs.
