Bankruptcy/Debt Control in General
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A collection agency is calling me daily. What can I do?
There are some limits on what collection agencies can do, although the exact regulations differ slightly across Canada. For example, a collection agency must not make calls that are so frequent or threatening that they could be considered “harassment”. Also, there are only certain times of day when collection agencies are allowed to call (again, these vary from one province or territory to another).
If you feel you are being harassed by a collection agency, contact either a member of Credit Counselling Canada or a trustee in bankruptcy (they can help with more than just bankruptcy). These services can act as a go-between to help you sort out your difficulties with the agency or creditor.
To learn more, see the external resources.
Can a collection agency take me to court?
Yes.
However, normally the collection agent representing your creditor will try numerous other tactics first, such as calling you and sending you letters. If these methods are unsuccessful and they believe you have the ability to pay, then they will consider taking you to court.
It also depends on whether the agency purchased the debt, or whether they were simply hired to try and collect. If they were simply hired to try and collect the debt and their collection tactics fail – they will usually just refer the matter back to the creditor who may then consider legal proceedings.
The collection agency is threatening to come and take my property, can they do this?
Maybe.
In general, in order to be able to seize your property, a collection agency must have a court order allowing it to do so. Unless they believe you have goods with enough re-sale value to cover the amount you owe, they may not want to spend the effort and cost in legal fees to do this.
For a lender to be able to seize your goods without a court order, it must have your written permission (given at the time of borrowing) to place a lien on the goods. It is important to know if you signed such a document.
Examples:
- If you bought an item using a credit card and ONLY signed the credit card slip, you did not sign a lien document.
- If you bought an item on a “buy now, pay later” arrangement, there could be a clause in the contract which gives permission to place a lien on the goods if payment is not made.
However, in many provinces basic household goods are exempt from seizure, meaning they cannot be taken.
If a collection agency does take me to court, what will happen?
If you are taken to court, the court will first determine whether or not you owe the creditor. In most cases the fact that you do owe the money is not in dispute and/or very easy for the creditor to prove. Once this is proven, the judge issues a judgment, stating that you owe the money.
The collection agency may also apply to the court to enforce the judgment, which generally means they apply to seize your bank account or other assets, or garnishee (link to definition on ALink) your wages.
Will I go to jail for not paying my debts?
No. Jail terms are the result of a criminal trial. To go to jail you must be both charged with a crime and be convicted of that crime.
Creditors’ actions are in civil court; they usually lead to things like orders of freezing or garnishee, but not jail.
I want to stop all of this. Must I file for bankruptcy or do I have other options?
No, you do not necessarily have to file for bankruptcy. In Canada, there are a several alternatives that can be explored before filing for bankruptcy.
Some of the possibilities include:
- negotiating a payment plan with your creditors / collection agency on your own (also known as an “informal proposal”);
- a debt consolidation loan;
- a consolidation order; (also known as an “Orderly Payment of Debts” (OPD))
- a consumer proposal (also known as a “Division II Proposal”) to creditors; and
- a Division I proposal.
If you eliminate these other options, bankruptcy is the final option to solve your financial problems. If you are curious about your options, consider consulting a licenced trustee in bankruptcy. For more information about the role of a trustee in bankruptcy, see here.
I am having trouble understanding all these terms about bankruptcy. Is there a list of definitions?
Yes. The Office of the Superintendent of Bankruptcy has posted a glossary. It can be found in our External Resources.
If you are considering bankruptcy and want to know more, you may wish to consult a licenced trustee to review your situation. Filing bankruptcy is a personal choice (unless forced into by your creditors – which is rare); you cannot be forced into bankruptcy by discussing your situation with a trustee. For more information about the role of a trustee, see here.
What is a “trustee in bankruptcy” and how can this person help me out of my current financial situation?
A trustee in bankruptcy is a person licensed by the Canadian Superintendent of Bankruptcy to do the following:
- give a debtor information and advice about both the bankruptcy process and its alternatives;
- administer proposals (both consumer and Division I) and bankruptcies and manage assets held in trust; and
- make sure that both the debtor’s rights and the creditor’s rights are respected.
A trustee is not a salesperson and is ethically and legally obligated to provide you with objective, unbiased advice on your options. He or she will not “sell you” into bankruptcy. If another option makes more sense, a Trustee should advise you so.
A licensed trustee for bankruptcy is not the same things as a “Financial Advisor”, who is not licenced and is not qualified to be advising of your options (unless they are also a licensed trustee in bankruptcy).
In order to file a proposal (both consumer and Division I) or to file for bankruptcy, a trustee in bankruptcy must be used.
To find out if a person is a licensed Trustee, please see the list of licensed trustees in bankruptcy. If a person in not on this list, he or she is not a licensed trustee in bankruptcy.
More Information
| Other FAQs in this section | ||
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| Debt Control in General | Options other than Declaring Bankruptcy | Declaring Bankruptcy |
This page was last updated in July, 2009.
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