Dealing With Creditors
Dealing with Debt Collectors
When you’re having debt trouble, you might not feel like talking to your creditors. But dealing with them sooner rather than later will help keep things from getting worse. Communicating with those you owe money to might seem scary, but in the end, gaining their cooperation is key to successfully managing your debt. By helping your creditors understand your situation, they will know what to expect from you, and can even make it easier for you to find a solution that works for you.
When Creditors Contact You
Getting letters or calls about your unpaid debt is a stressful experience. Creditors do have the right to ask for payment and they can pursue all legal options to recover the money you borrowed. However, you have your own rights and responsibilities as well, and each province has its own rules about what collectors can and can’t do. These rules protect you from harassment so long as you hold up your end too.
If you’re receiving collection phone calls, check with your province’s consumer protection office for the rules around debt collection as they vary across Canada. Generally speaking, collectors can only call between specific hours, and they can’t keep calling your workplace to check your employment status. In some provinces, you can also ask them in writing to only contact you by writing, and they’ll legally have to stop calling so long as you respond to their letters.
Whether you’re contacting creditors or being contacted by them, make sure to keep good notes about your calls. This will help you remember what was said, what you agreed to, and what the next steps are. Your goal is let them know what you’re going through and what you can and can’t do right now about your debts. When you take this approach, they know what to expect and can work with you.
When You Contact Your Creditors
Many people are scared to start a conversation with creditors because they’re worried about the consequences. However, ignoring the problem will just make it worse. So long as your debt has not passed the statute of limitation, communicating with your creditors as soon as possible is usually your best course of action.
Of course, knowing what to say is just as important as saying it. Outline your situation in writing for your creditors. Aim to be honest, factual, and clear about what you can or can’t do. If you tell your credit card company that you can only pay $100 rather than the minimum $200 for the next 3 months because you were laid off, then they’ll be much more likely to work with you than if you just ignore their call or letters.
Sample Letters to Creditors
Below are sample letters that can be used in common situations to communicate with a creditor. However, before writing your creditor a letter, make sure to read through the warning messages. Always be honest, but also be aware of what could make your situation worse. There are some things that, if mentioned in writing, can trigger acceptance of the debt or extend the time period the creditor can legally pursue you for debt payment.
Reduced Payment
Can’t Make Payments
Forgiveness of Debt
Please Note:
If you have not made a payment on a debt for some time and you contact one of your creditors in writing, either on your own or with one of the sample letters below, this may in some provinces constitute “acknowledging the debt,” and restart the statute of limitation in the same way making a payment would.
Always use the term “alleged debt” when communicating with collectors or creditors. Sometimes they may attempt to get you to verbally acknowledge the debt. This, too, could restart the statute of limitation.
The statute of limitation, which determines how long a creditor has to collect on a debt that is no longer acknowledged by the debtor, varies by province and ranges from 2 to 6 years.
Credit reporting agencies also report debts on your credit report based on the date of last activity on the debt. After 6 years of no activity, a debt is typically no longer reported by the credit reporting agencies.
MYTHS vs FACTS
About Debt Collection
Myth: You can go to jail for debt.
Fact: In Canada, there’s no debtor’s prison and people are not jailed for non-fraudulent debts.
Myth: If you stop getting collection calls, your debt is gone.
Fact: Phone calls are just one way that you can be contacted about unpaid debts.
Myth: You can always pay your original creditor rather than a collector.
Fact: Creditors cannot accept any more payments if they’ve sold your debt to a collection agency.
Myth: Collectors can garnish your wages automatically if you don’t pay.
Fact: Creditors must go before a judge to obtain a court order to garnish your wages.
Myth: Filing a bankruptcy or consumer proposal will erase records of your debt.
Fact: This doesn’t happen until 6 or 7 years after you are discharged from bankruptcy or 3 years after you pay off your consumer proposal. At that time records of all debts are erased from your credit report. However, the courts maintain a permanent, public record of your insolvency.
Myth: Collection agents can call my family members and ask them for money.
Fact: Only the people whose names are on the debt can be required to pay.
Myth: Ignoring the debt collectors will make them go away.
Fact:When you legally owe the money, ignoring them can make your situation worse.
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