Debt Management June 24, 2026 · Updated June 24, 2026

Which Debt Solution Do You Qualify For in Canada? 2026 Eligibility Guide

Q: What debt solutions are available in Canada?

Canada has five main debt relief options: (1) consumer proposal — a legal settlement with creditors administered by a Licensed Insolvency Trustee (LIT) under the Bankruptcy and Insolvency Act; (2) bankruptcy — a formal insolvency discharge under the BIA; (3) debt consolidation loan — refinancing multiple debts into a single loan; (4) HELOC or home equity loan — using home equity to pay off unsecured debt at lower rates; (5) debt management plan (DMP) — a repayment agreement through a non-profit credit counselling agency. Debt settlement companies (non-LIT) are a sixth option but are largely unregulated and associated with scams.

Q: What is the minimum debt to file a consumer proposal in Canada?

The Bankruptcy and Insolvency Act sets the minimum at $1,000 in unsecured debt to file a consumer proposal. However, the practical minimum is approximately $10,000 because LIT administration costs make proposals uneconomical below that amount. The maximum is $250,000 in unsecured debt excluding the mortgage on your principal residence. Debt above $250,000 requires a Division I Proposal or bankruptcy.

Q: Can I get debt relief in Canada with bad credit?

Yes. Consumer proposals and bankruptcy have no credit score minimum — eligibility is based on inability to pay, not creditworthiness. A consumer proposal actually stops credit damage from worsening: it freezes your credit impact at an R7 rating for the proposal term, versus continuing to slide toward R9 collections. Debt consolidation loans and HELOCs do require minimum credit scores (600–650 depending on lender), so formal insolvency proceedings are often the only option for scores below 600 with unmanageable debt.

Q: How do I know if a consumer proposal or bankruptcy is right for me?

Consumer proposal is usually better when: you have income to support a fixed monthly payment, you own assets worth protecting (home equity, RRSP, TFSA, vehicle), and your unsecured debt is under $250,000. Bankruptcy is usually better when: income is too low or unstable for proposal payments, debt exceeds $250,000, or you have no significant assets to protect. Q1 2026 OSB data shows 78.5% of Canadian insolvency filers chose consumer proposals over bankruptcy — mostly because proposals protect assets and keep monthly costs predictable.

Q: What is a Debt Management Plan (DMP) and who qualifies?

A Debt Management Plan is an informal arrangement between you and your creditors, negotiated by a non-profit credit counselling agency. There is no debt maximum or minimum, no credit score requirement, and no LIT involvement. Creditors are asked to reduce or eliminate interest (many do, but they are not legally required to). You make one monthly payment to the agency, which distributes it to creditors over 3–5 years. DMPs are best for people with stable income who can afford to repay most or all of what they owe — just not at current interest rates.

Canadian debt relief eligibility by debt amount, income, assets, and credit score. Consumer proposal, bankruptcy, HELOC, DMP, and debt settlement — who qualifies for what.

Marcus Chen · Debt Relief Expert & Founder, CollectorHQ

Key Takeaways

Consumer proposal: available if unsecured debt is $1,000–$250,000, you have income, and creditors would receive more than in bankruptcy — no minimum credit score
Bankruptcy: available if you owe at least $1,000 and cannot pay debts as they become due — no credit score requirement, no asset requirement
HELOC/home equity consolidation: requires 20%+ home equity, 600+ credit score, debt-to-income ratio under 40%
Debt Management Plan (DMP): works for unsecured debts of any amount when you can afford reduced monthly payments — no insolvency filing
The right option changes based on 6 variables: debt amount, income stability, asset value, credit score, debt type, and urgency

Not sure which option fits your situation? Take the 2-min assessment →

The right debt solution in Canada depends on six variables: your debt amount, income stability, asset value, credit score, debt type, and how urgent your situation is. Consumer proposals and bankruptcy are available regardless of credit score. Consolidation loans and HELOCs require minimum credit and equity thresholds. Debt management plans require stable income but no minimum credit. Use the tables below to find what you qualify for before booking any consultations.

Quick Qualification Table: All 5 Options at a Glance

Solution	Debt range	Credit score needed	Income needed	Assets needed	Administered by
Consumer proposal	$1,000–$250,000 unsecured	None	Stable enough to make fixed payments	Not required, but protects them	Licensed Insolvency Trustee (LIT)
Bankruptcy	$1,000+ unsecured	None	Not required	Not required	Licensed Insolvency Trustee (LIT)
Debt consolidation loan	$2,000–$50,000	600–650 minimum; 680+ for best rates	Proof of employment required	Not required (unsecured); collateral for secured	Bank, credit union, or alternative lender
HELOC / home equity loan	Any amount (limited by equity)	600+	Proof of income required	20%+ home equity; max 80% LTV	Bank, credit union, mortgage lender
Debt Management Plan (DMP)	Any amount	None	Must afford reduced payments	Not required	Non-profit credit counselling agency

Which Option Fits Your Situation: Decision Matrix

Find the row that most closely matches your situation.

Your situation	Best option	Why	Next step
Debt $10K–$250K, stable income, has RRSP or home equity	Consumer proposal	Protects 100% of assets; fixes payments	Free LIT consultation
Debt $10K–$250K, no income, no assets	Bankruptcy	No surplus income, nothing to lose = fastest/cheapest discharge	Free LIT consultation
Debt over $250K unsecured (excluding mortgage)	Division I Proposal or bankruptcy	Consumer proposal cap exceeded	Free LIT consultation
Homeowner with 20%+ equity, credit 650+	HELOC or home equity loan	Lowest available interest rate (4.95–5.95% at Big-6 banks, June 2026)	Compare HELOC options
Debt $5K–$50K, credit 650+, stable income	Debt consolidation loan	Avoids insolvency record; preserves credit path	Compare consolidation loans
Debt any amount, steady income, can repay if interest removed	Debt Management Plan	No insolvency filing; creditors often cut interest to 0–7%	Contact non-profit credit counsellor
CRA tax debt, wages being garnished	Consumer proposal or bankruptcy immediately	Stay of proceedings stops CRA garnishment same day of filing	Free LIT consultation
Primarily student loans under 7 years old	Neither proposal nor bankruptcy will discharge them	BIA 7-year rule; government loans not dischargeable until 7 years post-study	Apply for Repayment Assistance Plan
Debt under $5K, any credit score	Negotiate directly	Filing costs exceed debt amount	Call creditors and propose a settlement
Debt $5K–$10K, credit under 600, no assets	Bankruptcy	Cheapest formal option; discharged in 9 months with no surplus income	Free LIT consultation
Secured debt only (mortgage, car loan)	Renegotiate with lender	Formal insolvency rarely improves secured debt terms	Call lender’s hardship department

Consumer Proposal Eligibility in Detail

A consumer proposal is available when all of the following apply:

You owe at least $1,000 in unsecured debt (credit cards, lines of credit, personal loans, CRA tax debt, unpaid rent, etc.)
Your total unsecured debt does not exceed $250,000 (excluding the mortgage on your principal residence)
You are insolvent — meaning you cannot pay debts as they become due, or total debts exceed the value of your assets
The proposal offers creditors more than they would receive in bankruptcy — the LIT calculates this floor

Eligibility factor	Threshold	Notes
Minimum unsecured debt	$1,000	Practical minimum is $10,000 due to administration costs
Maximum unsecured debt	$250,000	Excludes mortgage on principal residence
Credit score minimum	None	Creditors vote, not credit bureaus
Income minimum	None (strict)	Must be able to support payment; low income may mean bankruptcy is cheaper
Asset requirement	None	Assets make proposals more valuable to creditors
Residency	Must be in Canada	No citizenship requirement
Prior proposals	Cannot file for same debts if prior proposal was annulled	Can file new proposal for new debts

Bankruptcy Eligibility in Detail

Bankruptcy in Canada has the lowest eligibility threshold of any formal debt relief option:

Eligibility factor	Threshold
Minimum debt	$1,000 in unsecured debt
Credit score	No minimum
Income	No minimum (low income often means cheaper bankruptcy)
Assets	No minimum
Residency	Must be in Canada
Citizenship	Not required

The main cost variable in bankruptcy is surplus income. If your net monthly income exceeds the OSB threshold ($2,355/month for a single person in 2026), you pay 50% of the excess to the estate for 21 months. Below threshold, most first bankruptcies discharge in 9 months with minimal cost.

Debt Consolidation Loan Eligibility

Consolidation loans require creditworthiness that formal insolvency proceedings do not.

Factor	Minimum to qualify	Notes
Credit score	550 (alternative lenders); 650 (banks and credit unions)	Below 600, expect 30–47% rates that may exceed credit card rates
Debt-to-income ratio	Under 40–44% of gross income	Must service new loan plus existing obligations
Income	Proof of employment or stable income	Self-employed need 2 years of tax returns
Existing missed payments	Varies — recent 90+ day lates may disqualify with banks	Alternative lenders more flexible

If you cannot qualify for a consolidation loan at under 25% interest, the loan likely will not reduce your payments meaningfully. At that point, consumer proposals or bankruptcy are worth comparing.

What Q1 2026 Data Shows About Option Choice

Q1 2026 OSB data shows 37,121 Canadians filed insolvency — the highest quarterly total since 2009. Of those:

78.5% filed consumer proposals (29,140 filers)
21.5% filed bankruptcy (7,981 filers)

The breakdown reflects the income and asset profile of Canadian insolvency filers in 2026: most have some income and at least modest assets to protect, making proposals the preferred tool. The average insolvent debtor carried $67,496 in unsecured debt at filing — well within the proposal limit and too high to make consolidation realistic for most.

How to Take the Next Step

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Run the numbers — use the consumer proposal calculator to see what a proposal would cost vs your current debt payments
Compare all options — see the debt solutions comparison side-by-side
Book a free consultation — find a Licensed Insolvency Trustee near you for a no-cost assessment of which option fits your specific file
If collections are active now — consumer proposal stops wage garnishment the same day it’s filed; do not delay if you have active enforcement

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Frequently Asked Questions

What debt solutions are available in Canada?

What is the minimum debt to file a consumer proposal in Canada?

Can I get debt relief in Canada with bad credit?

How do I know if a consumer proposal or bankruptcy is right for me?

What is a Debt Management Plan (DMP) and who qualifies?