Canadian Debt Questions, Answered
Short answers to the questions Canadians ask most, each linked to a full guide with official sources.
What is a consumer proposal?
A legally binding offer to your unsecured creditors, filed only through a Licensed Insolvency Trustee, to repay part of what you owe over up to five years. Interest stops and most collection actions are halted.
Consumer proposal guide →Is a consumer proposal better than bankruptcy?
It depends on your income and assets. A proposal lets you keep assets and has a smaller credit impact; bankruptcy is often faster and cheaper for people with low income and few assets.
Proposal vs bankruptcy →How long does a bankruptcy last in Canada?
A first bankruptcy can end in as little as 9 months, or 21 months if you have surplus income.
Bankruptcy guide →What does a Licensed Insolvency Trustee do?
Trustees are federally licensed professionals and the only people who can file consumer proposals and bankruptcies. The first consultation is free.
Trustee guide →Can a collection agency garnish my wages?
Not by itself. A private creditor generally needs a court judgment first. The CRA is an exception and can issue a Requirement to Pay without going to court.
Wage garnishment guide →How long can a creditor sue me for a debt?
In most provinces, two years from the last payment or acknowledgement; in Quebec, three. After that a lawsuit generally fails, but the debt isn't erased.
Limitation periods by province →How long does a collection stay on my credit report?
Generally about six years on Equifax and TransUnion. A consumer proposal generally drops off three years after completion.
Credit report timelines →What are my rights with collection agencies?
Collection agencies must be licensed in your province and follow provincial rules on when and how they contact you. Ask for written details of the debt before you pay.
Collection agency rights →Can CRA tax debt be included in a consumer proposal?
Yes. Personal income tax owed to the CRA is unsecured debt and can be included in a consumer proposal or bankruptcy.
CRA tax debt guide →Are student loans included in bankruptcy?
Only if at least seven years have passed since you stopped being a student. Federal student loans have charged no interest since April 2023.
Student loan guide →What's the maximum a payday loan can cost?
Since January 1, 2025, the federal limit is $14 per $100 borrowed.
Payday loan guide →Should I use a debt settlement company?
Be cautious. They aren't Licensed Insolvency Trustees, can't stop collections, and often charge fees. You can negotiate settlements yourself for free.
Debt settlement guide →Does DebtDefender lend money or settle debt?
No. DebtDefender is an independent, free Canadian debt information and tools site. It doesn't lend, settle debt or file proposals.
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