No one wants to receive a debt collection notice. Missed payments and overdue bills are stressful enough—but that all magnifies when a collection company calls. While this can feel incredibly scary, there is no need to panic. You have rights as a consumer, and there are action steps you can take (plus, you can always reach out to a Licensed Insolvency Trustee to help you navigate any debt collection).
Let’s explore these consumer protection laws and handling collection notices.
What is a Debt Collection Notice?
A debt collection notice (or a debt collection letter) is a warning that your creditor plans to send your debt to a collection agency.
When you receive a debt collection notice, it should include the following information:
- Name of the collection agency
- Name of the person or business you owe money
- How much you owe
What to do if You Receive a Debt Collection Notice
If you receive a debt collection notice, contact your creditor right away. See if you can offer to pay some or all of the debt to try and stop it from going to collections. You can also ask your creditor if they will work with you to find an alternative debt repayment arrangement.
What to do if Your Debt is Sent to Collections?
What happens if you’re too late and your debt is sent to collections? We asked Mary-Ann Marriot, one of our Licensed Insolvency Trustees (LIT) with Allan Marshall & Associates in Nova Scotia for some key tips and tricks. Here are the steps you can take if a debt collector contacts you and says you owe them money.
1. Stay calm: “The first thing is…don’t panic,” says Mary-Ann Marriott. “Take a deep breath and try to stay calm. Because chances are the person on the other end of the line is going to be in bully mode and try to intimidate you.”
2. Ask questions: “Start asking for information,” advises Marriott. When you ask questions you switch the power dynamic of the call. Put yourself in the driver’s seat—lead the conversation and get the information you need. Ask how much you owe, who you owe it to, and when you started to owe the debt.
3. Keep a log: When talking to a debt collector, record everything. Write down who you spoke to, when you talked to them, the name and phone number of the collection company, and what you said. Marriott says, “Most of the time the calls are recorded, so if you know the date and time, you have the right to request that recording.”
4. Take your time: Marriott recommends that you review and verify the information you received from the collection company. Do you remember this debt? Does the information make sense? Can you go back into your records and confirm the debt is yours? She says, “Don’t just jump in and do what they ask you.”
5. Consider your options: Can you afford to pay your debt? Do you have any money saved up to pay with a lump sum? What about monthly payments? Are you able to borrow money to pay off your debt?
6. Inform yourself: Take some time to understand your rights. Marriot recommends that you search the name of the collection company plus “consumer rights” or “consumer protection laws.” The search result can help you find a list of your rights. You can also visit the Government of Canada’s website to learn your rights when dealing with debt collectors. The more you know, the more confident you can feel when dealing with collectors.
7. Speak to a LIT. If you feel overwhelmed and don’t know what to do, contact a Licensed Insolvency Trustee or consult a lawyer for advice. A LIT can help you communicate with the collection company to sort things out. Remember, you don’t have to do it alone.
Debt Collection and Your Credit Score
If your debt is sent to collections, your credit score will drop. Negative information typically stays on your credit report for up to seven years. Plus, a low credit score can make it harder to borrow money or rent an apartment. Even if you manage to borrow money with a low credit score, you will likely pay a higher interest rate.
Here’s what you need to know to minimize the impact when you are contacted by a collection agency.
How to protect your credit score
To protect your credit score, Marriott says the best thing you can do is pay off your debt as soon as possible. While you want to slow down and take time to ensure you have all of the information, timely debt repayment is the best way to help your credit. Don’t ignore your debt, especially when you receive that debt collection letter.
Each province and territory does have a statute of limitations in which a creditor or collector can legally take action against you for unpaid debt. The time starts when you first incurred the debt or last acknowledged your debt. Debt is acknowledged when you make a payment or admit that the debt is yours.
After the statute of limitations has passed, the collector can no longer take you to court. However, collectors can legally continue their debt collection phone calls because you still owe them money. And Marriott advises that you don’t try to out-wait your debt, as it can really harm your credit.
What if You Can’t Afford to Repay Your Debt?
If you can’t afford to repay your debt, your best option is to speak to a LIT. Licensed Insolvency Trustees are the only professionals in Canada who can administer legal debt settlement options, such as a Consumer Proposal or Bankruptcy.
Consumer Proposal
A Consumer Proposal is an offer made to your creditors where you pay a portion of your debt, extend the repayment time, or both. As soon as you file a Proposal, all collection calls, wage garnishment, or lawsuits held against you will stop.
Bankruptcy
Bankruptcy is a legal process where those who cannot pay their debt get a second chance. If your debt is out of control and you can no longer afford your payments, Bankruptcy might make sense. While Bankruptcy sounds scary, the purpose is to give honest debtors a fresh start. Like a Proposal, when you file for Bankruptcy all collection calls and other creditor actions against you will stop. This can provide some immediate relief.
Speak to a LIT—We Can Help
Handling collection notices, dealing with creditors, and dodging debt collection calls can feel overwhelming. The good news is, you don’t have to handle it alone. A LIT at Allan Marshall & Associates can guide you through the debt process and help you find a path forward. For a free, no-obligation consultation call us at 1-888-371-8900 or fill in our online contact form.
