Debt Relief Options in Ontario: Complete Guide (2026)

TL;DR

Ontario residents facing unmanageable debt have several regulated options: consumer proposals, personal bankruptcy, debt management plans through non-profit agencies, and debt consolidation loans. Each option has different eligibility requirements, costs, and credit impacts. Free initial consultations are available through Licensed Insolvency Trustees and accredited credit counselling agencies across the province.

Understanding Your Options in Ontario

If you are struggling with debt in Ontario, you are not alone. Ontario consistently accounts for the largest share of consumer insolvency filings in Canada — approximately 40% of all national filings according to the Office of the Superintendent of Bankruptcy. The important thing to understand is that multiple legal options exist, each designed for different financial situations.

Here is a clear breakdown of every major debt relief option available to Ontario residents.

Consumer Proposals

A consumer proposal is the most popular formal debt relief option in Ontario. Under the Bankruptcy and Insolvency Act (BIA), you offer to repay a portion of your unsecured debts — typically 20% to 50% — over a maximum of five years through a Licensed Insolvency Trustee.

Key advantages for Ontario residents:

• You keep all your assets, including your home and vehicle
• All interest charges stop immediately upon filing
• A Stay of Proceedings prevents creditors from garnishing wages or freezing accounts
• CRA tax debts can be included
• Creditor collection calls and legal actions stop

Eligibility: Your total unsecured debts (excluding mortgage on principal residence) must be under $250,000. For debts above this threshold, a Division I proposal may be available.

Consumer proposals now outnumber bankruptcies in Ontario by more than 3 to 1, reflecting a strong preference among both debtors and creditors for this option.

Use our consumer proposal calculator to estimate your monthly payments.

Personal Bankruptcy

Bankruptcy provides the fastest path to debt elimination but involves surrendering non-exempt assets. In Ontario, bankruptcy exemptions allow you to keep:

• Clothing up to $7,117
• Household furnishings up to $14,180
• Tools of the trade up to $14,405
• One motor vehicle up to $7,117
• Home equity up to $10,783
• Most RRSP savings (except contributions in the last 12 months)

A first-time bankruptcy with no surplus income takes approximately 9 months. If your income exceeds the government threshold, the bankruptcy extends to 21 months with required surplus income payments.

Bankruptcy remains on your Equifax credit report for 6 years after discharge and on your TransUnion report for 7 years.

Debt Management Plans (DMPs)

A debt management plan is an arrangement through a non-profit credit counselling agency accredited by the Ontario Ministry of Public and Business Service Delivery. In a DMP:

• You repay 100% of your principal debt
• Interest rates are reduced or eliminated (negotiated with creditors)
• Payments are consolidated into one monthly amount
• The typical repayment period is 3 to 5 years

DMPs are best suited for those who can afford to repay the full principal but are struggling with high interest rates. They are available through agencies such as the Credit Counselling Society and other accredited organizations.

Debt Consolidation Loans

A debt consolidation loan combines multiple debts into a single loan with a lower interest rate. This option requires qualifying for a loan through a bank, credit union, or licensed lender.

Requirements typically include:

• A credit score above 600 (sometimes lower through credit unions)
• Sufficient income to service the loan
• In some cases, collateral (home equity line of credit)

Consolidation loans do not reduce the principal you owe — they simply restructure the debt at a better rate. If you cannot qualify for a reasonable interest rate, a consumer proposal may be more effective.

Ontario-Specific Protections

Ontario provides several protections for people in debt:

Wages Act: Ontario's Wages Act limits wage garnishments to 20% of net wages (50% for support payments). However, CRA is not bound by this limit — they can garnish up to 100% of wages without a court order, making a consumer proposal or bankruptcy important if you owe CRA debt.

Collection agency rules: Ontario's Collection and Debt Settlement Services Act prohibits collection agencies from using threatening language, calling at unreasonable hours, or contacting you at work if asked to stop. Agencies must be licensed with the Ontario Ministry of Public and Business Service Delivery.

Exemptions in bankruptcy: Ontario's exemptions (listed above) determine what assets you can keep if you file for bankruptcy. These exemptions are among the more modest in Canada, which is one reason consumer proposals are particularly popular in Ontario.

How to Choose the Right Option

| Situation | Best Option | |---|---| | Debts over $10,000, assets to protect | Consumer proposal | | Debts over $10,000, few assets, low income | Bankruptcy | | Manageable debt, high interest is the problem | Debt management plan | | Good credit, can qualify for a loan | Debt consolidation loan | | Unsure what to do | Free consultation with LIT or credit counsellor |

Take our debt relief quiz for a personalized recommendation based on your specific financial situation.

Free Resources in Ontario

Licensed Insolvency Trustees: Required by law to offer a free initial consultation. Find a trustee near you through the OSB directory.

Credit Canada: Ontario's largest non-profit credit counselling agency offers free financial counselling and debt management plans.

211 Ontario: Dial 2-1-1 for referrals to local financial assistance programs, emergency funds, and community resources.

Legal Aid Ontario: If you are facing a lawsuit from a creditor and cannot afford a lawyer, Legal Aid Ontario may provide assistance.

Review all your debt relief options before making a decision, and always get at least two professional opinions.

FAQ

How much does a consumer proposal cost in Ontario? LIT fees for consumer proposals are regulated by the federal government and are included in your monthly payments — you pay nothing upfront. The total cost is determined by what your creditors accept, typically 20% to 50% of your total debt spread over up to 5 years.

Can I include my mortgage in a consumer proposal in Ontario? No. Mortgages are secured debts and cannot be included in a consumer proposal. However, all unsecured debts — credit cards, lines of credit, payday loans, CRA tax debts, and personal loans — can be included.

What happens to my car if I file bankruptcy in Ontario? Ontario allows you to keep one motor vehicle worth up to $7,117. If your car is worth more than this exemption amount, you may need to pay the difference to the bankruptcy estate, or consider a consumer proposal instead where you keep all assets.

Is there a minimum amount of debt to file a consumer proposal in Ontario? There is no legal minimum, but practically a consumer proposal is most cost-effective for debts of $10,000 or more. For smaller amounts, a debt management plan or direct negotiation with creditors may be more appropriate.

Sources

• Office of the Superintendent of Bankruptcy Canada — Insolvency Statistics
• Ontario Ministry of Public and Business Service Delivery — Consumer Protection
• Bankruptcy and Insolvency Act (BIA), R.S.C., 1985, c. B-3
• Ontario Execution Act — Exemptions