Debt Options Guide
Debt Settlement in Canada
Updated
Debt settlement means offering a creditor a lump sum smaller than the balance in exchange for closing the account. You can do it yourself for free. Get every agreement in writing before you pay, and be cautious with for-profit debt settlement companies: they are not Licensed Insolvency Trustees, cannot stop collections or garnishments, and often charge fees.
How to negotiate a settlement
- Confirm the debt is yours and the balance is correct
- Decide what lump sum you can genuinely pay
- Make a written offer and state the conditions: the account is closed and no further amount is owed
- Pay only after you receive written acceptance, and keep proof of payment
Warning signs with settlement companies
Up-front fees, advice to stop paying creditors while you save into their account, promises that collection calls will stop, or claims they can file a 'government program' are all reasons to walk away. Several provinces license or regulate debt settlement services — check with your provincial consumer protection office.
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Related guides
- Your Rights When a Collection Agency CallsWhat collection agencies can and can't do in Canada, how to verify a debt, limitation periods by province, and which provincial regulator to complain to.
- Consumer Proposal in Canada: How It WorksHow a consumer proposal works in Canada: who qualifies, the $250,000 limit, the 5-year maximum, the creditor vote, credit impact and what it costs.
- Credit Counselling and Debt Management PlansHow non-profit credit counselling and debt management plans work in Canada, what they cost, how they affect credit, and how they differ from a consumer proposal.
Sources
DebtDefender is an independent information site, not a Licensed Insolvency Trustee or law firm. This guide is general information, not advice for your situation. See our disclaimer.