By Jennifer Abrahams | Reading time: 8 minutes, 15 sec| 1707 words | | Last update: 2024/03/20
Many yearsagoI was a collections agent for acar loans company.My job was basically to bother people until they paid us what they owed. No one wanted to hear from me,whichgave me a bit of a complex,butI couldn’t really blame them!
It’s tempting to avoidcollection calls, butdoes that make the debt go away?
Is ignoring your debt collection calls a good idea?
When it comes todebt collection calls, it is never clever to ignore them.Infact, it may make things a lot worse for you.Thedebt collectormayfilea collections lawsuit in court, whichcould lead to the garnishing of wages,seizure ofpersonal property,ormoney taken from your bank accounts.They may call your employer, family, or other contacts you provided when you applied for the credit.Evenif a debtcollector stops calling, yourcredit scorecouldstill be affected, limiting your ability to borrow in the future.
What could happen ifyou ignore your creditors?
Creditorshave thelegalright to collectdebtand these are some of thewaysthey can do so,whether or notyou answer the phone:
Filing with their collection department,whosefull-time job is to collect outstanding payments.
Hiringout to adebt collection agency(a company thathelps companies recover money that is unpaid)for payment on the company's behalf.
Sellingyour debt toadebt collection agency, who generally earn a percentage of what they collect.
Filing a collections lawsuit in court.
Garnishing yourwages.
Seizing your personal property.
Taking money from your bank accounts
How long is a debt collector allowed to pursue the collection of a debt in Canada?
We might think that ghosting a collector will make them eventually give up, but that’s not the case.Theregulationsabout debtcan varyacrossthe country, soit isimportant to understandyourprovince'sregulations.If thereareno rulesin your province, the federal rules apply. Federalregulationsindicatea debt collector has 6 years from the last payment to take collectionorlegal actionagainstyou.
Whentalking to your debt collectors, youshouldhave alltheinformation and know what the debt collector is andis notallowed to do. Even though there isa periodthat they may file or take you tocourt,thisdoes notmean the debt is forgiven.Some debts are exempt from theregulations, meaning they never goaway.
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WhichDebt Has No Time Limitations?
While this is not an exhaustive list, here aresome ofthe most commontypes of debtthat have no time limits:
Secureddebtslike mortgages, vehicle loans,loans fortravel trailers,andthelike.Anyloan forsomething that can be heldfor collateral.
Unsecureddebtwhere the creditorhasa judgement against the client.While there is often alimited timeframe, these judgments are often renewed.
Debtwherethe creditorhasinitiateda lawsuit against the client before thelimitationtime has passed.
Any type ofspousalor child support(includingoverdue payments), whichremains owingevenaftera child has turned 18.
Any debt that has been a result of fraud, embezzlement, or misappropriation.
Any type of fines that are from courtliketraffic violationsand others.
Any money that you owe the government, such as CRA debts(taxes, overpayments,other). These types of paymentsareneverforgiven.
Debt that is unsecured where typically the creditor has a judgement against the client.
Are debt collectors allowed to take money from bank accounts or garnish wages?
Debt collectors cansueon behalf of creditors. If theywin and receive a judgment againstyou,theycan garnish your wages and take money from your bank accounts.What they can do and how much theyreceivedepends onyourincome and assetsas well as the amount of the debt.
How do financial institutes have the right to collect? Howdoesthe“right of offset”work?
The“right of offset”, also known as a “right of set-off”meansafinancial institutioncanuse any depositsby the creditor topay any amountsowed to them such as credit cardsorloans.Most banks have a clause on any accounts, credit card agreements you signwhichthengivesthemthispermission.
When a right of offset is used,the bank cantakemoney from your personalchequingaccount if yourcreditcard is in arrearsto get back what is owed to them. They donot needyourconsent, or even your knowledge,because of the agreement you sign.If the amount in your account does not cover the entire debt, they do not need to leave you with a positive balance.
Thisoffsetcould leave you shortoffunds to cover other paymentslike upcoming cheques or automatic payments.Youmay then be chargedaNSF (Non-sufficient funds)fee foreach payment thatdoes notgo through, adding further to your debt. This canalsoapply toanyjointaccounts you have.
How long do collection activities stay on a credit report?
Collectionactivitiesstay on your credit file for six years, starting from the date of your last payment, even if the full balance has been paid.As a result, your credit score, and therefore ability to borrowfunds in the future,can be significantly impacted.
Options when you are unable to pay off your debt
When it comes to debt there are several options if you are unable to pay it all in full.
These include:
1. You may negotiate a settlement with the collection agency by offering to pay a portion of the debt owed and requesting that the remaining unpaid balance be written off. You may request from the creditor or collection agency that the debt be removed from your report immediately as part of your settlement agreement.
2. You could pursue a debt management plan through a credit counselling agency. If you have the financial ability to repay the debt in full but require more time, this might be a good option. One disadvantage to this approach is that you will be required to pay the debt in full whereas other debt relief options you may have the ability to negotiate to have a portion of your debt forgiven.
3. There is a government debt relief program available called a Consumer Proposal. Consumer Proposals are only offered through Licensed Insolvency Trustees, and are an excellent option if you're overwhelmed with debt and do not have the capability to pay it off in full. As part of the Consumer Proposal, your Trustee will negotiate a settlement on your behalf directly with your creditors, which could reduce your debt by up to 80%. You will have up to five years to pay off the total agreed amount through a single, easy to manage monthly payment, and as soon as you sign on, the program provides you protection from your creditors. Once your obligations have been completed the remainder of the debt will be forgiven, and you will be able to start rebuilding your credit.
The best option for you will depend on your individual situation including total debt owed, your assets, your income and your ability to pay off any debt. Speaking to a professional will help guide you on your options and determine which option truly is best for you.
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What happens if I make a partial payment to the collection agency?
While it may seem like a good idea to make a partial payment to the collection agency it will have a significant impact on your credit report. Once your debt has been sent to a collection agency there will be long lasting consequences on your credit report making it difficult to obtain credit until the debt has been cleared and removed from your credit report. It is important to be proactive when it comes to outstanding debt to protect your credit.
Is there any way to stop collection activities or wage garnishees?
The ideal way to stop this activity is topaythe debt.However, what if youdon’thave the funds to pay?
A consumer proposal, administered by a Licensed Insolvency TrusteelikeBromwich+Smith,will stop all collection activities. Any legal actionsmustimmediatelyhalt, including wage garnishees, collection calls, and legal proceedings. A proposal is a powerful legal agreementthatwilleliminate the debt in collectionsaswell asanyother debtthat isincluded.Aconsumer proposalusually reduces debt to only a fraction oftheoriginalamountowed, and it islegally bindingonyour creditors. Any legal actions will immediately stop, including wage garnishees.Allcreditors, including credit cards,bank loans,payday loans, andmore, can be included in a proposal.A proposal is interest-free and can be paid over a five-year period.
Tolearn more about the collectionagencies in Canadaclickhere.
If you have debt collectors calling and/or are struggling to make your payments, contact a licensed professional for a FREE confidential consultation on how to get debt collectors off your back! Our Debt Relief Specialists are available by phone at 1.855.884.9243, or you can request a call back via our contact us page. There is no need to travel to a local office. Licensed Insolvency Trustee, Bromwich+Smith, is now offering video appointments, with all services available from the comfort of your home.
FAQs:
1. What could happen if you ignore your creditors?
Ignoring creditors can lead to various consequences including legal actions such as filing collections lawsuits, garnishing wages, seizing personal property, and impacting credit scores.
2. How long is a debt collector allowed to pursue the collection of a debt in Canada?
Debt collectors in Canada generally have 6 years from the last payment to take collection or legal action against you, according to federal regulations. However, provincial regulations may vary.
3. Which debts have no time limitations?
Debts with no time limitations include secured debts like mortgages, debts with judgments against the client, debts with pending lawsuits, spousal or child support payments, debts due to fraud or embezzlement, court fines, and government debts like CRA debts.
4. Are debt collectors allowed to take money from bank accounts or garnish wages?
Debt collectors can take legal action to garnish wages or access bank accounts if they win a judgment against you. The extent of action depends on factors such as income, assets, and the amount of debt owed.
5. How long do collection activities stay on a credit report?
Collection activities stay on a credit report for six years from the date of the last payment, impacting credit scores and future borrowing ability.
6. What options are available if I am unable to pay off my debt?
If you're unable to pay off your debt, you can consider negotiating a settlement with the collection agency, enrolling in a debt management plan through a credit counseling agency, or opting for a Consumer Proposal program through a Licensed Insolvency Trustee. Each option has its own advantages and eligibility criteria, so it's important to assess your individual situation before deciding.
7. What happens if I make a partial payment to the collection agency?
Making a partial payment to the collection agency may seem like a step in the right direction, but it can have significant consequences on your credit report. Once a debt is sent to a collection agency, it will have long-lasting impacts on your credit until the debt is fully cleared and removed from your report. It's crucial to address outstanding debt proactively to safeguard your credit.
8. Is there any way to stop collection activities or wage garnishments?
The most effective way to halt collection activities or wage garnishments is to pay off the debt. However, if you're unable to do so, a Consumer Proposal administered by a Licensed Insolvency Trustee can provide relief. A Consumer Proposal stops all collection activities and legal proceedings, including wage garnishments, and allows you to negotiate a reduced repayment plan with your creditors. It's a legally binding agreement that can significantly reduce your debt burden and provide a fresh financial start.
Related blog
1-What to do if you have collectors calling?
2-Top 6 questions asked about collection agencies in Canada?
3-Get debt collectors off your back!
4-How can I Stop Collections from Calling Me?
