'I cleared your debt' would imply that the speaker has paid the second person's debt, in whole, on their behalf. 'I cancelled your debt' (spelled with double l) would usually mean that the creditor has cancelled the borrower's debt, perhaps without it being paid. 'I cancelled the money you owe me' is understandable as meaning the same as the second phrase but sounds considerable less natural.

In a formal situation you could say "I've written off your debt". Informally you could say "forget about the money you owe me".