In this article we’ll explore the issue of collection agencies and legal action, including what a debt collection agency is, how they operate, and what powers they have to recover money from you.
What is a debt collection agency?Debt collection agencies are organizations that specialize in collecting unpaid debts. While some debt collectors work for public bodies, debt collection agencies are private companies that often have debts passed to them from elsewhere.
Your creditor (the person or company you owe money to) might have hired a debt collection company to recover money from you, while certain collection companies buy debt from creditors in order to pursue it on their own.
How does the debt collection process work in Canada?
Initial contactA debt collector won’t just start calling you out of the blue. Instead, they’ll usually send you a written notice informing you of the name of the debt collection agency, the name of the creditor (the person or business you owe money to), and the amount of money the agency will be pursuing.
Debt collection callsAfter making initial contact, debt collectors will usually call you over the phone to try and put pressure on you to repay what you owe. These calls can be distressing, but it’s important that you stay calm. The best tactic is to make sure you take note of the following information:
- The name of the individual calling you
- Their contact number
- The name of the company they work for
- The name of the creditor they’re collecting for
Three strikes ruleWhile debt collectors can contact you over the phone, there are limits to how often they can do so. These differ depending on what province you’re in but in Ontario, they operate a three strike rule.
The three strikes rule means that debt collectors can’t call, leave emails or voicemails, or speak with you more than three times in one week after their first conversation with you. The only method of communication that’s exempt from the three strikes rule is regular mail.
Can collection agencies sue you over unpaid debt in Canada?If you have stopped making payments or defaulted on a debt, it is possible that a debt collector will pursue legal recovery options.
Before a debt collector can take you to court, they will have to file a lawsuit against you. You will be notified of the lawsuit, including who is pursuing it.
If you decide not to defend against the lawsuit, your creditors will win the case by default, so if you have a lawsuit lodged against you, you should consider contacting a lawyer or seeking debt advice from a Licensed Insolvency Trustee (LIT).
What should I do if debt collectors pursue legal action against me?If a debt collection agency decides to take legal action against you, you will be left with two main options; fighting the legal case against you, or paying off the debt you owe.
Repaying the debtThe quickest way to settle the case against you if a collection agency takes you to court is to come to an agreement with your creditors over the money you owe.
You can negotiate with your creditors directly and see if they would be willing to work with you on a payment plan. Alternatively, you can work with a Licensed Insolvency Trustee (LIT), a debt professional whose job it is to negotiate an affordable repayment plan on your behalf.
Fighting the legal actionIf you’re in disagreement with your creditors and feel strongly that you shouldn’t have to repay the money they are demanding, you might decide to fight the legal action being taken against you.
As previously mentioned, you will need to enlist a lawyer or professional debt advisor to defend you, otherwise you will automatically lose the case. They will file a defense on your behalf.
Once the defense has been filed, a court date will be set where you will have the opportunity to put your case across. The trial will go one of two ways; either your creditors will be successful and the court will grant them certain powers to collect, or you will be successful and no judgement will be awarded.
What happens if I lose a court case to a creditor or collection agency?If a debt collection agency wins a decision against you, the court will grant them certain powers of collection that enable them to take back the money you owe.
Wage garnishmentWage garnishment is the process of a creditor or collection agency taking money directly from your bank account. The amount of money they can take and how that money is handled depends on your individual financial circumstances, however if a creditor initiates wage garnishment as a way of recouping their money, there’s very little you will be able to do to stop it.
Threatening your homeIf they have been successful in pursuing a judgement against you, the court can empower a creditor or collection agency with the ability to seize your home. This process involves them filing the judgement against your main home, or other properties, in the local Land Titles office. While seizing your home over a debt would only transpire in extreme circumstances, it’s something to be wary of.
How can I protect myself from debt collectors trying to collect outstanding debts?When debt collectors are calling your home or putting pressure on your family, it can feel like you have nowhere to turn. But even when things are bad, t’s important to remember there will always be debt relief options available to you.
To get more information on how to protect yourself from debt collectors, get in touch with A. Fisher & Associates today.