1. There are no debtors prisons in Canada
Let's start with the good news. No one in Canada goes to prison for being in debt.
In Victorian England more than half the country's prison population were debtors. In the 18th and early 19th Centuries 10,000 individuals each year were imprisoned in England for being in debt.
2. You can avoid collection calls
It is possible to avoid collection calls. The Debt Coach YouTube channel has published a YouTube video titled "How to Avoid Collection Calls".
In this YouTube video former collection agency lawyer and author Mark Silverthorn describes the various ways that a person can avoid collection calls.
3. You can often stop collection calls
In many instances it is possible to stop collection calls. This involves sending a special letter--referred to as a "cease-and-desist" letter to the collection agency or creditor that is calling you.
Once the entity calling you receives the cease-and-desist letter it is illegal for it to continue to make collection calls to you.
4. You might be able to avoid paying a debt due to the passage of time
Each province and territory in Canada has a law that requires a creditor to sue for an unpaid account with a certain number of years. Failure to do so might mean that the debtor can avoid paying a penny to his or her creditor.
The majority of Canadians live in a jurisdiction where the statute of limitations on an unpaid account is two years. In Quebec it is three years, and in a few provinces it is six years.
Debt Coach Silverthorn has published a video providing details about when an individual can avoid paying a debt due to the passage of time.
In this YouTube video former collection agency lawyer and author Mark Silverthorn explains when a Canadian can avoid paying an unpaid account due to the passage of time.
5. Your creditor might be willing to accept a payment for less than what you owe
If you have an unpaid account and you have not made a payment on it for a minimum of six months then it is possible that your creditor might be willing to accept a one-time lump sum payment for significantly less than what you owe as settlement in full.
For nine years I worked as a consumer lawyer representing individuals across the country struggling with debt. I personally negotiated favourable settlements on behalf of my clients.
In one instance I was able to negotiate a settlement for 15 cents on the dollar.
The more time that has elapsed since the date of your last payment the better your odds of negotiating a generous settlement offer.
The key to obtaining a good settlement is N-E-G-O-T-I-A-T-I-O-N.
The Debt Coach Silverthorn YouTube channel has published a YouTube video providing some key tips for negotiating a settlement.
In this YouTube video former collection agency lawyer and author Mark Silverthorn provides some key insights for negotiating a favourable settlement.
6. Collection agencies rarely sue people
Earlier in my career I worked 12 years as a collection lawyer for four of the largest collection agencies operating in Canada. During that period I sent out hundreds of thousands of letters threatening to sue people.
In fact we rarely sued people.
Collection agencies are really in the business of trying to collect monies from individuals without having to sue them.
7. A creditor suing you is not guaranteed recovering any monies from you
The fact that your creditor has sued you is no guarantee that your creditor is going to recover any monies from you.
Ideally, your creditor would like to sue you, obtain a judgment against you, and place a lien on your real property. When you go to sell your home or refinance the property your creditor will then recover its monies.
If you do not own real property then your creditor's prospects for recovering monies from you could be much dicier.
Your creditor might be left with the option of doing a wage garnishment against you.
Creditors who successfully sue individuals might not be able to recover any monies by way of wage garnishment in the following scenarios:
You are paying court-ordered support
You have other judgments against you
You have other creditors
You are prepared to quit your job if your wages are garnisheed (that will terminate the wage garnishment)
8. Canada has consumer-friendly insolvency laws
The federal Government has enacted laws designed to assist the honest but unfortunate debtor obtain a fresh start.
You are eligible to take advantage of Canada's insolvency law if you are insolvent. To be insolvent your total debts must be greater than your total assets.
If you are insolvent then you have the option of either making a consumer proposal or filing for personal bankruptcy.
If you make a consumer proposal then you will repay a portion of what you owe to your unsecured creditors in equal monthly installments over a period not to exceed five years.
A consumer proposal might be attractive for someone with significant assets or substantial income.
If you file for personal bankruptcy then some, and perhaps all, of your unsecured consumer debt will be discharged or forgiven.
Personal bankruptcy will not be attractive for those with a lot of assets or high income earners.
9. Some assets are beyond the reach of creditors
Governments in Canada do not want those in debt to become destitute.
Accordingly, each province and territory in Canada has passed a law that shields some assets from creditors. This property that is beyond the reach of creditors is referred to as exempt property.
Exempt property includes RRSPs and RRIFs.
It also includes a few thousand dollars worth of property in the following asset categories:
clothing
household items
an automobile
work-related tools
The exact amount for each category that is beyond the reach of creditors will vary by province.
10. Certain income is beyond the reach of creditors
Certain types of income are beyond the reach of creditors. As a general rule, pension income and social assistance payments are beyond the reach of creditors.
In this YouTube video I canvass the ten reasons why Canadians struggling with debt should not despair.
In this YouTube video former collection agency lawyer and author Mark Silverthorn describes ten key reasons why a Canadian struggling with debt should not despair.
My observations in this article is based upon three decades working in the debt collection and debt relief industries.
Comments