Dealing With Creditors

Learn how to communicate with your creditors effectively.

Dealing with Creditors and Finding Bankruptcy Alternatives

No one plans to get into trouble with their debts. However, when it happens, taking steps sooner than later to deal with your creditors will help keep things from getting worse.

Communicating effectively with your creditors helps them understand your circumstances. They want to know if your situation is temporary, like a lay off, or permanent, where you won’t be able to get back to work any time soon. Creditors also want to know if you’re able to make some payments or if you’re not able to pay anything at all towards your debts.

It’s important to gain the co-operation of your creditors as you work through a difficult financial time. When they know what they can expect from you, it’s easier for them to find ways to help you and you’ll know what you can expect from them in return.

Couple looking at their finances and considering filing a consumer proposal to deal with their debts.

When You Aren’t Able to Make Any Payments

There’s a big difference between wanting to pay your debts and being able to pay your debts. No one doubts that you want to honour your payment commitments, but sometimes you’re just not able to. Communicating with your creditors in writing may be the best thing to do if you aren’t able to pay your debts.

Communicating with your creditors may sound frightening at first, but knowing how the process works will make it easier.

Below are some sample letters to communicate with creditors, but please read the yellow warning below before using them.

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

For when you can only afford to make partial payments.

Can’t Make Payments

For when you can’t make any payments for a short period of time.

Forgiveness of Debt

For when you can’t pay now or in the foreseeable future.

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.

Does it Make Sense to File Bankruptcy if I Can’t Pay My Debts?

What alternatives do I have to filing bankruptcy?

Another way of communicating with your creditors is through a bankruptcy trustee. Bankruptcy is a legal process that tells your creditors that you’re not able to pay your debts. Regardless of what you try first to deal with your debts, or if you’ve considered many bankruptcy alternatives, you still have the option to file for bankruptcy later on if you need to.

Bankruptcy is an extreme solution to debt problems and it should never be your first option. However, depending on your level of income, what your assets are, where you work and what your long-term financial situation looks like, bankruptcy might be the right option for you.

To find out more about declaring bankruptcy, contact us to speak confidentially with one of our Credit Counsellors. Bankruptcy in Canada is not a free process and it has long-term implications. To make an informed decision, you need to get the facts before you declare bankruptcy because you’re not easily able to back out of the bankruptcy process once it’s been started.

Find out how to get back on track.

Get the help you need. Find the right option that will work for your specific set of circumstances. Feel free to give us a call or chat with us online. We're here to help.

Struggling with too much debt?

Speak with a non-profit credit counsellor.

When you’re overwhelmed with too much debt, you need a plan to get out and get back on tack. There are many ways to do this including debt relief programs and do-it-yourself options. The key is to find out what your options are and then make a plan to resolve your situation. Our certified non-profit credit counsellors can help you with this. Talking to them is always free, confidential, and non-judgmental.

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