Work through your debt, budget, and goals to see which relief option fits — from credit counselling and consolidation to a consumer proposal, Chapter 13, or bankruptcy.
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Debt relief is not a single product — it is a ladder of options that runs from budgeting at the low end to bankruptcy at the high end. Between those extremes sit balance transfers and consolidation loans (which lower your interest rate), non-profit credit counselling and debt management plans (which negotiate reduced interest and one monthly payment), and formal insolvency proceedings (which legally reduce the principal you owe). The right rung depends on how much you can pay each month and how far your balances exceed your ability to repay them.
The single most important number is what you can put toward debt each month after covering essentials. If that figure is meaningful, lighter tools may clear your debt without a formal insolvency record. If you cannot cover essentials and minimum payments at the same time, you are likely insolvent, and a consumer proposal or bankruptcy (Canada) or a Chapter 7 or Chapter 13 case (US) is usually the honest answer.
Not all debt behaves the same way in relief programs. Tax debt owed to the CRA or IRS carries powerful collection tools — these agencies can garnish wages and freeze accounts without going to court — but tax debt can still be included in a consumer proposal, bankruptcy, or Chapter 13 plan, and some older income tax is dischargeable in the US under strict timing rules. Student loans are stubborn: Canada releases government student debt only after seven years out of school (five with hardship), and the US discharges it only on a showing of undue hardship.
Secured debts — your mortgage and car loan — are tied to collateral, so relief programs treat them separately from unsecured debt. You generally keep the asset only if you keep paying, and Chapter 13 or a proposal can help you catch up on arrears. Co-signed debts are another trap: relief for you does not erase a co-signer's obligation, so a lender can still pursue them.
The debt-relief space attracts for-profit 'debt settlement' companies that promise to slash your balances while charging large upfront fees. Many collect fees for months before negotiating anything, and interest and collection action often continue in the meantime. In Canada, only a Licensed Insolvency Trustee can file a legally binding consumer proposal or bankruptcy — no one else can bind your creditors.
A safer first stop is a non-profit credit counselling agency, which offers free budgeting help and lower-cost debt management plans, or a free consultation with a Licensed Insolvency Trustee or bankruptcy attorney. Verify credentials before paying anyone. This tool is educational; the professional you consult should confirm which option genuinely leaves you better off.
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This tool provides general educational information about debt relief options only — not legal, financial, or insolvency advice. Rules, eligibility, and outcomes vary by province and state and change over time. Consult a Licensed Insolvency Trustee in Canada, a bankruptcy attorney in the US, or a non-profit credit counsellor before acting.
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