This page sets out a plan for getting out of debt in Canada, in the order most people work through it: list what you owe, choose an order to pay it off, find money for payments above the minimum, lower the interest where you can, and bring in outside help if the numbers don’t work. Each step links to the guide that covers it in depth, and the debt strategies hub lists every guide on paying off debt, getting relief and dealing with collectors.
Step 1: List every debt
Write down each debt with five details: the lender, the balance, the interest rate, the minimum payment and the due date. Statements and your Equifax and TransUnion credit reports will turn up accounts that are easy to forget, such as an old store card or an overdraft. The list shows the total owed, the total of the minimum payments, and which balances cost the most each month.
The list also shows whether the debt has become a problem. These are common signs:
- paying only the minimum on credit cards month after month;
- using one card or line of credit to pay another;
- borrowing for everyday costs such as groceries or rent;
- getting calls from collectors;
- being unable to put anything into savings;
- debt payments taking a large share of income (the debt-to-income ratio guide shows how to measure it and the ranges lenders work with).
If several of these apply and the minimum payments are already hard to cover, Step 6 is the more realistic starting point.
Step 2: Choose an order to pay it off
Every debt gets its minimum payment, and any extra money goes to one target debt at a time. The two common ways to pick the target are the avalanche method (highest interest rate first, which costs the least interest) and the snowball method (smallest balance first, which clears whole accounts sooner). Debt avalanche vs snowball works through both on the same set of debts, and the debt payoff calculator shows the payoff date and interest for your own list under either method.
When a target debt is paid off, its payment rolls into the next one, so the amount going to debt each month stays the same while the number of accounts shrinks.
Step 3: Find money for payments above the minimum
The payoff date depends mostly on how much goes to debt each month beyond the minimums. Common sources are:
- recurring costs that can be cut or renegotiated, such as subscriptions, phone and internet plans, and insurance premiums;
- grocery and dining spending, tracked for a month or two to see where it goes;
- one-time money, such as a tax refund, a work bonus or selling things no longer used;
- extra income from more hours or a side job.
A written budget makes the amount repeatable rather than a one-off; budgeting basics covers how to set one up. Many plans also keep a small cash cushion so that a car repair doesn’t go straight onto a credit card; the emergency fund calculator helps size it.
Step 4: See what a bigger payment does
Take a balance of $20,000 at 20% a year, with interest charged monthly, paid with a fixed $400, $600 or $1,000 a month. The first month’s interest is $333, so a payment has to be larger than that before the balance starts to fall.
| Monthly payment | Months to pay off | Total interest paid |
|---|---|---|
| $400 | 108 | $23,360 |
| $600 | 49 | $9,436 |
| $1,000 | 25 | $4,530 |
The months come from the standard loan formula: months = log(payment ÷ (payment − monthly interest)) ÷ log(1 + monthly rate), rounded to the nearest month. Total interest is everything paid over that time, less the starting balance. The largest payment costs a fraction of the interest of the smallest, because the balance spends far less time growing at 20%.
The same arithmetic is why a card paid at the minimum takes so long to clear: credit card minimum payments shows the timeline for a card balance, and credit card debt below covers card-specific tactics.
Step 5: Lower the interest rate where you can
A lower rate means more of each payment reduces the balance. The main routes:
- A debt consolidation loan replaces several high-rate balances with one fixed payment. It helps when the new rate is clearly lower and the paid-off cards aren’t run up again; debt consolidation loans explains how it works, when it saves money and where to borrow.
- A balance transfer card moves card balances to a low promotional rate for a set period, usually for a transfer fee; balance transfer credit cards compares them.
- Home equity, for homeowners, can carry a lower rate but puts the home behind the debt; consolidating debt with home equity covers HELOCs and refinancing.
- Asking the lender. Card issuers and banks sometimes lower a rate, waive fees or set up a hardship plan on request; how to negotiate debt covers what to ask for and how to get it in writing.
Turning card balances into a loan backed by a car or a home changes what a lender can take if payments stop; secured loans explains the difference.
Step 6: Get help when the plan doesn’t add up
If the list from Step 1 shows that the minimum payments can’t be covered, or that the debt can’t realistically be repaid in a few years, the options move from payoff methods to formal help:
- Non-profit credit counselling reviews the budget for free and can set up a debt management plan: one monthly payment through the agency, often with interest reduced or removed by the creditors who agree to it. See credit counselling in Canada.
- A consumer proposal or bankruptcy, filed through a Licensed Insolvency Trustee, is a legal process that can reduce or release the debt. See consumer proposal vs bankruptcy.
- Comparing every option side by side, including the do-it-yourself routes above, is the job of the debt relief options guide.
If bills are already being missed, what to do when you can’t pay your bills covers which ones come first. If a debt has gone to an agency, your rights with debt collectors covers what collectors may and may not do.
Credit card debt
Credit card debt is expensive because card interest rates are high and minimum payments are set low, so a balance paid at the minimum can take decades to clear. Getting out comes down to three things: paying more than the minimum every month, putting the extra money where it saves the most, and not adding new balances while you pay down the old ones. This page sets out a plan, the tools that lower the interest cost, and where to get help. How cards charge interest and fees is covered across our credit card basics guides.
Step 1: List what you owe
For each card, note the balance, the interest rate and the minimum payment from the latest statement. The total tells you the size of the problem; the rates tell you where interest is costing most. Your statement also shows how long the balance would take to clear at the minimum alone, and credit card minimum payments explains why that estimate is so long.
Step 2: Pay more than the minimum, in a set order
Every dollar paid above the minimum goes to the balance. With more than one card, the usual approaches are:
- Avalanche: minimums on every card, and all extra money to the card with the highest interest rate. This costs the least in interest.
- Snowball: minimums on every card, and all extra money to the smallest balance. Clearing whole balances sooner can make the plan easier to keep going.
Debt avalanche vs snowball compares the two with worked examples, and the debt payoff calculator shows the payoff date and interest for your own balances under either method.
Step 3: Find money for the extra payments
Extra payments usually come from trimming regular spending, putting windfalls such as a tax refund or bonus toward the balance, or extra income. A budget makes the amount clear; the budget calculator is a starting point. Using the cards for new purchases while paying them down works against all of this.
Step 4: Lower the interest rate
A lower rate means more of each payment reduces the balance.
- Balance transfer. Moving the balance to a card with a promotional rate can cut the interest for the promotional period, after a transfer fee. The balance transfer calculator works out whether a transfer saves money after the fee, and our balance transfer card picks compare the offers. A balance left when the promotion ends is charged the card’s regular rate.
- Consolidation. A personal loan or line of credit at a lower rate can replace several card balances with one payment; debt consolidation loans covers how they work, and line of credit vs credit card compares the costs.
- Asking the issuer. An issuer can lower the rate on an existing card, and some will on request, especially for a customer with a good payment record; what counts as a good credit card interest rate covers asking.
Step 5: If payments are getting hard to make
Falling behind adds fees, can raise your rate and damages your credit; what happens if you miss a credit card payment covers each consequence. The Financial Consumer Agency of Canada’s advice is to “contact the lender right away if you think you’ll have trouble paying a bill.” Some issuers offer hardship arrangements.
When the debt is beyond what a plan can handle, there are formal options:
- Credit counselling. A non-profit credit counsellor can review your budget and may set up a debt management plan with your creditors; see credit counselling in Canada.
- A consumer proposal or bankruptcy, filed through a Licensed Insolvency Trustee, which legally reduce or clear unsecured debts; the consumer proposals and bankruptcy guide compares them. Both stay on your credit report for years, as set out in how long bankruptcy and consumer proposals stay on your report.
After the balance is gone
Keeping a paid-off card open, especially an older one with no annual fee, keeps its limit counting toward your available credit; does closing a credit card hurt your credit score explains why. Paying the full statement balance each month from then on means purchases cost nothing in interest. For debt beyond credit cards, the debt payoff guide covers loans and lines of credit too.
Free and low-cost help in Canada
| Resource | What it offers | Cost |
|---|---|---|
| Non-profit credit counselling agencies (for example Credit Counselling Society, Credit Canada) | Budget review, debt management plans | First session free |
| Licensed Insolvency Trustee | Review of every debt option, consumer proposals and bankruptcy | First consultation often free |
| 211 | Referrals to local financial, housing and food help | Free |
| Financial Consumer Agency of Canada | Plain-language guides on debt and on your rights with banks | Free |
How your debt compares
Comparing a balance with national averages says little about whether it’s manageable; income and interest rates matter more. For the national figures, average household debt in Canada has the Statistics Canada numbers by debt type, age and province.
Particular situations
- Student loans have their own interest rules and repayment help; see how to pay off student loans.
- Moving abroad doesn’t cancel Canadian debt; see leaving Canada with debt.
- A death in the family raises the question of who pays what’s left; see what happens to debt when someone dies.
- Stress and anxiety often come with debt; the debt and mental health guide lists free support.
When you can’t pay your bills
When there isn’t enough money for every bill, the order you pay them in matters more than the interest rates. Missing rent can lead to eviction within weeks, a missed credit card payment can lower your credit score, and some creditors can take money without going to court. This page sets out which debts to pay first and why, the eviction and winter disconnection rules in several provinces, what to ask creditors before a payment is missed, where emergency money and government help come from, and the formal options if the numbers still don’t work. The debt strategies hub lists the other guides.
Take stock first
Whatever caused the shortfall (a lost job, an illness, a large bill), the decisions below are easier with one list: the money still coming in (pay, EI, benefits, a partner’s income), the bills due before your next payday, the cash and unused credit you have, and every debt with its minimum payment.
Which debts to pay first
Priority debts are the ones where non-payment costs you your home, heat, income or freedom from enforcement, not the ones with the highest balance or rate.
| Priority | Debt | What can happen if it isn’t paid |
|---|---|---|
| First | Rent or mortgage | Eviction; for a mortgage, power of sale or foreclosure after missed payments |
| First | Heat and electricity | Disconnection (winter rules below) |
| First | Child or spousal support | Enforcement by the provincial maintenance program, including garnishment and licence suspension |
| High | Income tax and other amounts owed to the CRA | Interest at 7% a year compounded daily for Q4 2026, and collection without a court order (what happens if you don’t pay the CRA) |
| High | Car loan or lease | Repossession of the vehicle |
| High | Home and car insurance premiums | The coverage can lapse or the policy can be cancelled |
| High | Condo fees | A lien on the unit |
| Medium | Phone and internet | Service may be cut off |
| Medium | Government student loans | Sent to the CRA or the province for collection after 270 days of missed payments (student loans you can’t pay) |
| Lower | Credit cards, unsecured lines of credit, personal loans | Damage to your credit report, collections; a private creditor has to sue and win before it can garnish wages |
| Lower | Subscriptions and memberships | May be cancelled |
A working order for a month with too little money:
- Housing (rent or mortgage).
- Heat and electricity, especially in winter.
- Child or spousal support.
- Food and medication.
- The car loan, if the car is needed for work.
- A call to the CRA to set up a payment arrangement for any taxes owed.
- Minimum payments on cards and loans with whatever is left, and a call to each lender explaining the situation.
Lower-priority creditors can’t take your wages or bank account without suing and winning first; wage garnishment explains the court steps and the provincial limits. That buys time, but the debts still need dealing with, and missed payments do lasting damage to credit.
Eviction notice periods for unpaid rent
| Province | Notice for non-payment | Next step |
|---|---|---|
| Ontario | 7 days for an N4 notice given on or after September 21, 2026 (14 days before then) | The landlord applies to the Landlord and Tenant Board; an eviction needs a board order |
| British Columbia | 10 Day Notice to End Tenancy for unpaid rent; the tenant has 5 days to pay or dispute it | The landlord can seek an order of possession from the Residential Tenancy Branch |
| Alberta | At least 14 days’ notice for a substantial breach, which includes unpaid rent | Paying everything owed before the termination date voids the notice |
In these provinces, paying everything owed within the time the notice allows stops the eviction for that notice, and removing a tenant requires an order from the tenancy board or court, not just the notice. Other provinces and the territories set their own periods through their residential tenancy offices. Sources: Tribunals Ontario, B.C. Residential Tenancy Branch, Alberta.
Winter disconnection rules
| Province or utility | Winter protection |
|---|---|
| Ontario | Electricity and natural gas distributors can’t disconnect residential customers for non-payment between November 15 and April 30 each year |
| Quebec (Hydro-Québec) | Service interruptions for non-payment are suspended from December 1 to March 31 |
| British Columbia (BC Hydro) | Non-payment disconnections of residential customers are postponed from November 1 to March 31 |
Bills keep accruing during these periods, with interest or late charges, and disconnection can follow once the period ends, so a payment arrangement made in winter avoids a large balance in spring. Elsewhere, calling the utility before the disconnection date is the way to ask about a payment plan or an assistance program. Sources: Ontario Energy Board, Hydro-Québec, BC Hydro.
Call creditors before a payment is missed
Lenders, landlords and utilities have more options before an account falls behind than after. When a payment can’t be made, calling ahead and asking for the hardship or customer assistance team (not the regular service line) opens these possibilities:
| Creditor | What to ask about |
|---|---|
| Landlord | A written plan to pay the arrears over a few months |
| Mortgage lender | A payment deferral, a temporary reduced payment, or a longer amortization |
| Utility | A payment arrangement, equal billing, or a low-income assistance program |
| CRA | A payment arrangement |
| Bank or card issuer | A hardship program, a temporary rate reduction, a reduced minimum, or a deferral |
Note the date, the name of the person and any reference number on every call, and ask for the agreement in writing. How to negotiate debt covers the conversation in more detail, and debt collection rights in Canada covers what an agency can and can’t do if an account has already been sent to collections.
Emergency money
| Source | Things to know |
|---|---|
| Savings or an emergency fund | This is the situation it exists for |
| TFSA | Withdrawals are generally tax-free, and the room comes back the following January 1; see TFSA withdrawal rules |
| RRSP | Withdrawals are generally taxable income, and tax is withheld at source |
| Employment Insurance | For a job loss or illness, apply as soon as work stops |
| Benefits you may be missing | The Canada Workers Benefit, the Canada Groceries and Essentials Benefit (formerly the GST/HST credit) and provincial benefits; filing a tax return is what triggers most of them |
| Family | A loan from family works best with the amount and repayment written down |
| Selling things | A second vehicle, electronics, furniture |
| Short-term work | Gig, delivery and freelance work; the side hustles hub covers the options |
| Provincial or territorial social assistance | If EI isn’t available or isn’t enough; in Ontario, see Ontario Works, and 211 can point to the local program elsewhere |
| Food banks | Freeing up grocery money for rent or utilities |
| Rent banks and utility assistance | Provincial and municipal programs for arrears; 211 has the local list |
Payday loans are an expensive way to cover a short gap because of their fees, and a missed repayment can lead to a debt cycle. In the provinces that regulate them, the most a lender can charge is $14 for every $100 borrowed, which the Financial Consumer Agency of Canada works out to about 365% a year on a two-week loan. In the agency’s example of $300 borrowed for 14 days, a payday loan costs $42.00, against $5.92 on a line of credit, $7.42 with overdraft protection and $7.65 for a credit card cash advance. Payday loan alternatives lists cheaper options. The government benefits guide covers federal and provincial programs, and the lost job financial guide covers the first steps after a layoff.
Free help
- 211 (phone or 211.ca) connects to local help with rent, food, utilities and money.
- Non-profit credit counselling can set up a debt management plan that often includes interest relief; see credit counselling in Canada.
- Community legal clinics: in Ontario, people with a low income may qualify for free legal help on landlord and tenant matters from a clinic funded by Legal Aid Ontario.
- A Licensed Insolvency Trustee may offer a free first consultation on consumer proposals and bankruptcy.
Companies that charge large upfront fees to “settle” your debts can leave people worse off; the debt relief options guide covers how to spot them.
If the numbers still don’t work
If, after the priority bills, there’s not enough to cover the minimum payments on everything else, the formal options are:
- A debt management plan through a non-profit credit counsellor: you repay the full balances, often with interest reduced or removed by the creditors who agree.
- A consumer proposal through a Licensed Insolvency Trustee: a legal offer to pay part of what you owe, which stops collection action and binds the creditors once accepted.
- Bankruptcy, also through a trustee, which releases most debts in exchange for non-exempt assets and any surplus income.
Consumer proposal vs bankruptcy explains the two legal processes, and the debt relief options guide compares every route side by side.
After the crisis
Once income is steady again, the emergency fund calculator estimates how big a fund would cover your costs, the debt payoff plan covers paying down what’s left, and the credit score hub covers rebuilding a score after missed payments.
Money trouble is stressful, and the stress makes it harder to deal with the bills. The debt and mental health guide lists free support, including crisis lines available at any hour.
Debt and mental health
Debt and mental health are deeply connected, and the relationship runs both ways. Financial stress triggers anxiety and depression, which in turn make it harder to manage money, leading to more debt. Research from the Canadian Mental Health Association consistently shows that financial problems are among the top stressors Canadians report. If debt is affecting your sleep, relationships, or ability to function, you are not alone — and there are free resources specifically designed to help with both the financial and emotional sides of the problem.
This page covers how debt and mental health feed each other, the warning signs, practical first steps and where to find support. The financial side is covered in depth elsewhere: the debt strategies hub lists every guide, from a debt payoff plan to consumer proposals and bankruptcy.
The Debt-Mental Health Cycle
| Stage | What Happens |
|---|---|
| Debt accumulates | Overspending, job loss, emergency, illness |
| Stress begins | Worry about payments, avoiding bills |
| Mental health declines | Anxiety, depression, sleep issues |
| Financial behaviour worsens | Avoidance, more spending, missed payments |
| Debt grows | Late fees, interest, collections |
| Cycle deepens | Shame prevents seeking help |
How Debt Affects Mental Health
| Impact | How It Shows Up |
|---|---|
| Anxiety | Constant worry, racing thoughts about money |
| Depression | Feeling hopeless, withdrawing from others |
| Sleep problems | Insomnia, waking up thinking about bills |
| Relationship strain | Arguments about money, hiding debt from partner |
| Physical health | Headaches, stomach issues, high blood pressure |
| Shame and isolation | Not talking about it, avoiding friends |
| Decision paralysis | Unable to take action, overwhelmed |
Warning Signs You Need Help
| Sign | What It Looks Like |
|---|---|
| Avoiding all bills and statements | Unopened mail, deleted emails |
| Lying to family about finances | Hiding purchases, debt balances |
| Using credit for essentials | Groceries, utilities on credit card |
| Can’t sleep due to money worry | Regular insomnia, nighttime anxiety |
| Feeling hopeless about money | “I’ll never get out of debt” |
| Thought of self-harm | Debt feels like there’s no way out |
If you are in crisis or having thoughts of self-harm, call or text 9-8-8, the Suicide Crisis Helpline. Help is available 24/7.
Practical Steps When Debt Feels Overwhelming
The most important thing to understand when debt feels unmanageable is that avoidance makes everything worse. Unopened bills don’t disappear — they accumulate interest, late fees, and eventually collections. The single best action you can take today is to open every statement, list every debt in one place, and set up automatic minimum payments so nothing falls further behind while you figure out your next move. Then reach out to a free credit counselling service — they handle the emotional side of debt as well as the financial side.
Step 1: Stabilize
| Action | Why |
|---|---|
| Open all mail and statements | Know where you stand (knowledge reduces anxiety) |
| List all debts in one place | Total amount, minimum payments, interest rates |
| Identify essential vs non-essential expenses | Prioritize food, housing, utilities |
| Set up minimum automatic payments | Prevents further damage while you plan |
| Tell one trusted person | Breaking isolation reduces shame |
Step 2: Get Free Help
| Resource | What They Offer | Contact |
|---|---|---|
| Credit Counselling Canada | Free financial counselling, debt management plans | creditcounsellingcanada.ca |
| 211 | Local community services directory | Dial 2-1-1 or 211.ca |
| Your bank | Hardship programs, payment deferrals | Call your branch |
| Legal Aid | Free legal advice if facing lawsuits | Provincial legal aid office |
| Your employer | Employee Assistance Programs (EAP) often include financial counselling | Ask HR |
Step 3: Protect Your Mental Health
| Strategy | Details |
|---|---|
| Set a “money hour” | Deal with finances at one set time, not all day |
| Limit checking accounts | Once a day or week, not constantly |
| Celebrate small wins | Each payment made is progress |
| Exercise | Even walking reduces stress hormones |
| Talk to someone | Counsellor, friend, support group |
| Avoid comparison | Social media is not real life |
Mental Health Resources in Canada
Crisis Support
| Service | Contact | Availability |
|---|---|---|
| 9-8-8 Suicide Crisis Helpline | Call or text 9-8-8 | 24/7 |
| Kids Help Phone | 1-800-668-6868 or text 686868 | 24/7 |
Ongoing Support
| Service | What It Offers | Cost |
|---|---|---|
| BounceBack (CMHA) | Guided self-help for anxiety/depression | Free |
| Provincial mental health lines | Phone-based support | Free |
| Employee Assistance Programs | Counselling sessions | Free (through employer) |
| Therapy through insurance | Psychologist, social worker | Covered partially or fully |
Rights and Protections
Creditor Obligations
| Rule | Details |
|---|---|
| Must treat you fairly | Cannot harass or threaten |
| Hardship programs | Many banks offer payment deferrals or reduced rates |
| Collection limits | Cannot call excessively or at prohibited hours |
| Vulnerability guidelines | FCAC expects financial institutions to accommodate vulnerable consumers |
Your Options Don’t Disappear
| Situation | Options Still Available |
|---|---|
| Can’t make minimum payments | Credit counselling, debt management plan |
| Being contacted by collectors | Know your rights, request written verification |
| Debt more than you can repay | Consumer proposal (pay portion of debt) |
| Absolutely cannot pay | Bankruptcy (last resort, fresh start) |
| CRA debt | Payment arrangement, taxpayer relief provisions |
Helping Someone Else
If someone you care about is struggling with debt-related mental health issues, the most important thing you can do is listen without judgment. Statements like “just stop spending” or “you should have known better” shut down communication and increase shame. Instead, offer to help them find resources, sit with them while they open bills, or research credit counselling and debt solutions together. Financial crisis is temporary and solvable, and saying so can help.
| Do | Don’t |
|---|---|
| Listen without judgment | Say “just stop spending” |
| Offer to help them find resources | Take over their finances completely |
| Encourage professional help | Shame or lecture them |
| Check in regularly | Assume one conversation fixed it |
| Share this guide | Ignore warning signs |
Building Back: After the Crisis
| Phase | Actions |
|---|---|
| Stabilized debt | Celebrate reaching this point |
| Building emergency fund | Even $500 makes a difference |
| Rebuilding credit | Secured card, on-time payments |
| Financial confidence | Set small goals, track progress |
| Ongoing mental health care | Continue therapy/support if needed |
The Bottom Line
Debt is a financial problem with a practical solution, even when it doesn’t feel that way. Free credit counselling, debt management plans, and consumer proposals exist specifically to help people in financial crisis. If debt is affecting your mental health, address both at the same time: use mental health resources like the 9-8-8 Suicide Crisis Helpline and BounceBack alongside financial resources like non-profit credit counselling. You do not have to solve this alone.
Pages in this section
Getting out of debt
- Debt payoff planner: snowball vs avalanche
- Debt consolidation
- Credit counselling and debt management plans
- Debt settlement and debt relief companies
Consumer proposals and bankruptcy
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them between August 29, 2026 and September 29, 2026. How we check facts.
- Canada Revenue Agency: Prescribed interest rates
- Canada Revenue Agency: MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE
- Employment and Social Development Canada: Canada Student Financial Assistance Program annual report 2023 to 2024
- Financial Consumer Agency of Canada: Payday loans