Dealing With Creditors

How to communicate effectively with your creditors along with tips and guidance.

How to Communicate with Creditors & Collection Agencies

The Best Ways to Get Creditors to Listen

Sometimes, despite our best intentions, we aren’t able to make payments to our creditors as we had originally planned. This may be due to a variety of reasons, such as a decrease in income, an increase in housing costs, or an unexpected life event like illness. Whatever the reason for your inability to make your payments as agreed, or to even make any payments at all, you have rights and responsibilities as a consumer who has borrowed money.

Creditor Harassment – Collection Letters & Phone Calls
Consequences of Late Payments & Avoiding Creditors

If you fall behind on your payments and fail to contact your creditors, they will start to send you letters asking for or even demanding payment. They may also contact you by phone. While no one wants to receive these calls and letters, creditors are allowed to contact you to ask for payment and will pursue all avenues to recover any money that you borrowed.

Collection Agency & Creditor Laws
Creditors Calling at Work | Know Your Rights

Generally speaking, collectors cannot call you at all hours of the day and night, nor can they keep calling your place of employment to confirm your employment status.

Each province has exact rules governing what collectors can and cannot do. If you’d like to know what applies to your province, please contact us directly by phone or email and we’d be happy to provide you with this information. In some provinces, if you ask creditors in writing to communicate with you in writing only, they must do so. This will stop the majority of collection phone calls temporarily, but can affect how long a creditor may try to collect from you.

Stop Collection Agency Calls – Creditor Checklist
Preparing to Communicate

Putting an end to collection calls requires some planning on your part. Below are steps to help you communicate effectively with your creditors and collection agents.

Start by considering what income you do have. Include all of your current sources of income including wages, disability assistance, social assistance, a family member’s or partner’s income, gifts, child tax credits / benefits, pensions, old age security, HST/GST refunds, etc.

Related: Low Income, No Income… Now What? and What to Do When Facing Reduced Income

Spending, Personal & Household Budgets
Money Management

Consider all of your expenses – weekly, monthly, and seasonal. Include all of your spending – personal, living and household. Our Money Management Basics booklet (budget worksheets pages 4 – 5) may be of valuable assistance to you in this process. Feel free to contact us for assistance with determining your budget.

Stop Repossession & Collection
Home, Vehicle, Investments & More | Consequences of Late Payments

Next, consider what assets you have that may be at risk. Do you have a bank account at a financial institution that you owe money to? If you get behind with your payments at that financial institution, they may offset money from your bank account or investment product to pay towards your debt. Do you own a home, car or truck, recreational vehicle, vacation property, antiques and collectibles, or stocks / bonds / investments? Some of these may be in jeopardy if you’re unable to keep your debt payments up to date.

Joint Debts With Family & Friends
Seizure of Property

You also need to consider the nature of your debts. Are they joint with anyone? Are they cosigned or guaranteed by a family member or friend? Are they secured by real estate or property? Depending on the nature of your debts, your inability to pay may affect a family member or friend, or a creditor may want to collect on their security. Each province has laws around seizure of property – please feel free to contact us if you’d like to know whom to contact in your area for clarification about these laws.

Sample Letter Reduced Payment
Debt Repayment Plan

Once you’ve completed the 4 steps outlined above, you’re now ready to communicate with your creditors in writing. However, before you write your creditors a letter or an email, contact us for information about where to find out about the statute of limitation in your province. 

You need to provide enough information so that your creditors understand your financial difficulty and that while you’d like to pay them, you are not currently able to do so. It’s also important to include information outlining what you intend to do going forward.

Reasons for Financial Difficulty
Get Out of Debt and Keep It That Way

In order to help your creditors understand your situation, you need to outline your household income and provide proof of your situation. For example:

  • A letter from your doctor if you have a health situation or disability that is affecting your income
  • Proof explaining changes in your employment status, e.g. reduced hours, termination or Employment Insurance benefits
  • Confirmation that your family or marital status has changed

Personal, Household & Family Budget
Creditor Budget Request

Also prepare a summary of your budget stating how many people reside in your household and how many dependents you have. Include your total income, your housing and transportation expenses, debt obligations, medical expenses, grocery and personal expenses, as well as taxes that you need to pay. Don’t forget to include a monthly estimate of your necessary seasonal expenses.

Sample Forgiveness of Debt Letter for Collection Agency

Now it’s time to prepare a letter (see sample letters and important note below). Make a list of the address, phone and fax number for each creditor or collection agency. Be sure to obtain the name of the person / supervisor you have been dealing with at each company. Confirm which debt they are trying to collect on to make sure that two agencies aren’t trying to collect on the same debt.

How to Communicate In Writing with Creditors

Contact us for information about how to clarify how written acknowledgement of a debt impacts the statute of limitation in your province. 

You want to communicate in writing with your creditors so that you can explain your situation to them and ask them to only communicate with you in writing as well. This will stop the collection phone calls, providing you follow through with whatever you have proposed in your letter. You will also need to respond to their letters.

Ask Creditors to Only Communicate In Writing

For example, you stated in your letter that your family income has suddenly decreased because your partner is off work due to injury. You also explained that there is an insurance payment expected in 3 weeks and that you will make your debt payment then. Make sure you follow through with your payment. If it takes longer to receive the insurance payment, write them and tell them so. Your goal is to gain your creditors’ co-operation during your difficult time.

Communicating honestly and updating your creditors about your situation is very important in this process.

Sample Letter – No Ability To Make Payment

Once you’ve written a short letter to outline your situation, attach any relevant documentation and the summary of your budget. Then email, fax or mail it to your creditors or collection agents by registered mail. You want proof that they received it. Get proof every time you mail or fax anything to them and keep your receipts organized.

How to Negotiate Debt Repayment With Creditors

If you speak with someone to give them an update about your situation, jot down their name, number, time of call and what was discussed. You may need to provide these documents and receipts again in the future. Follow up oral communication with something in writing if possible (see note below regarding writing to your creditors). If the person you were talking to proposed a payment arrangement or special circumstances, ask them to send it to you in writing. Verbal agreements are difficult to prove. You can take the time to consider a written offer more carefully than if you are on the phone with someone. It’s important to only agree to what you are reasonably able to do – don’t get caught up in the heat of the moment.

Get Help With Creditors – Credit Counselling Society

If you feel that you’re situation is so bad that you may need to declare bankruptcy, don’t worry. You’re not alone. This is how a lot of people feel when they don’t see any light at the end of the tunnel.

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.

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.

Related Topics

Sample Letters

Use this checklist and get ready to communicate effectively with your creditors.

Ending Stressful Calls

Here are 4 DIY steps to take now when you need to put an end to stressful collection calls / letters.

Credit Counselling

Are you curious about what credit counselling is or how it works? Here’s what you need to know.