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If you find yourself unable to pay back any type of unsecured debt you will more than likely need to deal with a debt collection agent. Credit card companies and other types of lenders who provide unsecured loans employ collection companies to get their money back when their customers stop making regular payments.
Unfortunately dealing with a collection agent is never a pleasant experience and often if you borrowed from a less than reputable lender, your maybe even have to deal with illegal collection tactics. This is why it is imperative that you, as a borrower, must have at least a general idea of what the collection process should legally look like in Canada.
Below we’re going to lay it all out for you, the good, the bad, the legal and the illegal. This article will be a reference for anyone currently going through the debt collection process. We want you to know what your rights are and also what your responsibilities are, because if you’re not going to responsibility pay off your debts there are some consequences that you need to beware of.
What Happens When I Can’t Make my Loan Payments?
First, it’s important that you understand that debt collectors are regulated on a provincial level. This means that the rules, regulations and laws concerning debt collection vary depending on what province you live in. This being said, in general the process and the specific events that occur should look something like this:
The first contact you have with a debt collector is usually in the form of a letter. This letter will be a general request that you restart your payment plan. It may also be an explanation that your credit account is now in collection.
5 days after your debt collector sends you the first letter they are legally allowed to call you. If they are unable to get in contact with you or your phone number has changed, your collection agent is legally allow to call your friends, family members, neighbours and employer.
While this may seem like an invasive tactic, collection agents are only allowed to do this for the sole purpose of obtaining your new phone number or new address. No one needs to provide a collection agent with any information; they can refuse to say anything.
Once your collection agent has gotten in contact with you they must then provide you with the following information in writing:
Now that you have all the information you need from your debt collector you should find a way to pay back your debts. While we understand that no one wants to deal with a debt collector and that sometimes they can be insensitive and tough, if you actually owe the money now is the time to figure out how to pay it back.
If you continue to refuse to pay back your balance, your collection agent will probably make one final pre-legal attempt to get you to settle your account.
If you still refuse to pay, your debt collector can now pursue legal action against you if they feel that it is worth it. You will receive a notice of legal action at least 21 days in advance.
As part of the legal action being taken against you, you will need to attend a court hearing. If you actually do in fact owe the amount your debt collector is trying to collect, the judge will more than likely sign a Judgment saying that you are now legally required to pay off your debt.
Now that there is a Judgment on your debt, your debt collector can garnish your wages. The only way out of paying back your debt is to file for bankruptcy or file a consumer proposal.
As we discussed before, the collection process in Canada can at times be quite confusing as each of the 10 provinces and 3 territories all have their own laws put in place to protect both the creditor and debtor. While debt collectors are regulated by the law, there are some that do not follow it (learn how to deal with debt collection scammers here). Here are a few of the most important legal issues you need to be cautious of:
We cannot recommend enough that you visit the Government of Canada’s website should you have any specific concerns about dealing with a debt collection agency.
Having debt in collection is a serious issue that should not be taken lightly. We understand that financial problems can pop up out of nowhere and that there may be extenuating circumstances that are preventing you from paying off you debts. But ignoring your debts or your debt collector is never a good idea; it’s always in your best interest to deal with these issues head on. Contact your creditor before your account goes into collection or if your account is already in collection, speak with your collection agent right away. If you rightfully owe the money, it’s your responsibility to pay it back.
Need help managing your debt load? Check out this guide to learn more about debt, bankruptcy and other related topics.
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