Get Debt Collectors Off Your Back!

Get Debt Collectors Off Your Back!

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When something feels overwhelming it can be like the weight of the world is on you. In fact, you may even display physical signs of that burden – headaches, tight jaw, inability to sleep, becoming irritable and maybe even feeling unwell.  For many issues, we can, and do turn to our friends, family or professionals.  When it comes to financial strain or feeling overwhelmed by debt, that seems to be a different story.  For some reason, society has decided that talking about our finances or debt is still taboo.


Feeling overwhelmed by debt is tough enough on its own, compound that with debt collectors calling you, sending demand letters or worse sending a debt collection agency after you and this can really put someone over the edge. How do you deal with debt collectors when you’re not in a position to pay? 


Debt Collector Rights

Lenders or debt collectors have certain rights or options to collect on the debt. Depending on the type of debt, they can sue the debtor, seize the security and do both in some instances. Let’s take a look at the various types of contracts and the rights of creditors within each.  This is a general overview and may vary slightly from province to province.


   1. Secured Credit Contracts – This is a loan or line of credit that is tied to collateral or a co-signer. An example might be a car loan.  In this type of contract, the creditor can:

               - seize the security
               - sue you
               - or do both

The creditor can repossess the car, sell it, and then sue you for the remainder left owing


  1. Conditional Sales Contract – This is a contract wherein the creditor owns the goods until the debt has been paid. An example would be a rent-to-own furniture contract.

    The creditor can:

                   - seize the asset
                   - sue you
                   - but cannot do both

The creditor could seize the furniture and then you owe no further money OR the company lets you keep the furniture and sues you for the balance owing.


  1. Unsecured Credit Contract – This is the most common type of contract.  There are no goods promised and no co-signer. Examples would be Credit cards, utilities, bank or finance company loans and student loans.

    The creditor can:

             - Stop the service
             - Begin collection process
             - Sue you for the debt

The creditor can cut off your cell phone access, send the account to a collection agency and sue you for the balance owing.

How long can collection agencies collect on a debt in Canada?

There is a statute of limitations and it is different in each province, but just because the limitation period is up does not necessarily mean the creditors will stop calling.  It just means that they will not have the ability to pursue legally (ie. sue).  Making a payment or acknowledging the debt will extend the statute of limitation period.  Also, just because a debt falls off a credit report does not mean it is uncollectable. A creditor could re-report the debt to Equifax or Transunion  Some debt (taxes, secured loans) is not covered under the statute of limitations.


Does debt collection action affect your credit?

Once your contract goes to a debt collections agency, it can significantly lower your credit score and impede your ability to qualify for the best rates and terms. Collections remain on your credit report for 6 years from when they are paid out in full. 


Now that you know what your creditor’s or debt collector’s rights are, what options do you have to deal with debt collectors?


  1. Do Nothing

Wait until later -if you do not have any assets this could be an option. Consider your risks – your creditor’s may garnish wages, seize the security, send your account to collection agencies which leads to calls, letters and other threats.


  1. Credit Counselling, Debt Management Programs or Orderly Payment of Debt

There are several options and programs available across the country that offer a debt settlement, debt management program or credit counselling.  Not all are created equal so be sure to do your due diligence.  Check their Better Business Bureau ratings, their reviews and try a test phone call or appointment. 

With any of these options, you will pay back every penny you owe with interest in one monthly payment.  Many debts, such as Canada Revenue Agency CRA tax debt and student loan cannot typically be included in these options. Finally, your creditors have the final say in accepting or declining the settlement. For more information click  here.

  1. Consumer Proposal

This is the first and best alternative to a bankruptcy and yet most Canadians have never heard of it.  A consumer proposal is only offered though a federally licensed Insolvency Trustee firm.  With a consumer proposal, a Licensed Insolvency Trustee negotiates with your creditors to have a portion of your debts forgiven.  A consumer proposal is legally binding on your creditors with a stay of proceedings. This legally stops your creditors from contacting you or taking legal action against you.  All unsecured debts, including tax debt owed to Canada Revenue Agency can be included in a consumer proposal and your assets are not affected. 


  1. Bankruptcy

For many Canadians, the word bankruptcy evokes some strong emotions.  It feels like the end of the road, but it really is not.  It’s like the reset button.  It is for the honest, but unfortunate debtor – a means to have overwhelming debt forgiven.  It is an opportunity to start over and rebuild.  Bankruptcies, like consumer proposals, are only available through a Licensed Insolvency Trustee and offer the same protection with a stay of proceedings.  Creditors are legally bound and all contact must go through a Licensed Insolvency Trustee.  All unsecured debts, including tax debt owed to Canada Revenue Agency can be included in a bankruptcy and some assets cannot be liquidated.

Each of these options, will impact your credit.

In an ideal world, you would reach out for help before the debt collection agencies start calling.  That can be tough when you’re also feeling shame, guilt and uncertainty.  Now that you have a little more certainty around your creditors options as well as yours – it’s time to take action on that knowledge.  The biggest gap is between knowing and doing.  So, what can you do?

Step 1: Start by taking stock. Make a list of all the creditors you owe money to, the amount, the interest rate, and the payout amount.

Step 2: Update or create a budget. You need to know just how much money is coming in each month and how much is going out. Click on our Budget Planner.

Step 3: Be proactive. Creditors are more likely to work with you before things get out of hand and into a collection situation.  Contact your lenders and have a candid conversation with them.  Negotiate a settlement if you can.

Step 4: If you are already in a tough situation, collection agencies/debt collectors are already harassing you or you just feel overwhelmed by your debt, reach out for help.


Licensed Insolvency Trustees, Bromwich+Smith have debt relief specialists available to offer debt advice and debt restructuring entirely from the comfort of your own home. Now offering video appointments with clients, Bromwich+Smith’s Debt Relief Specialists are available for initial free, no-obligation, confidential consultation by phone at 1-855-884-9243 or request a call back at contact us page.

By Taz Rajan Community Engagement Partner at Bromwich+Smith
Taz has been in the finance industry for nearly 2 decades and has always been passionate about education and empowerment.  Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring.  Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationship.

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