Dealing with Collection Agents: The Process
If you have not paid what you owe, collection agencies will do what they can to induce you to pay. The normal process when dealing with collection agents is as follows:
First, if you are behind on payments, you will receive a letter from the collection agent requesting payment. The letter is usually worded in a marginally friendly manner, such as “to maintain your good credit rating, please forward payment as soon as possible.”
If you don’t pay, you will receive a more threatening letter, such as “your account is now in arrears; immediate payment is required to prevent further collection action.”
If you ignore that letter, the next letter will say something like “we will be commencing legal action in ten days if you have not made payment arrangements. Please contact us immediately to avoid legal action.”
About ten days later you may receive a letter that says “this is your final warning. In five days we will be commencing legal action.”
It is not unusual to get another “final” warning letter that says “unless we hear from you within 24 hours your account will be forwarded to our legal department for further action; you will be responsible for all court costs.”
It is usually one of these “final” letters that causes someone to contact a Licensed Insolvency Trustee for advice. Often during this process you will also be receiving numerous phone calls from collectors, also threatening legal action.
If you still do not pay, the collector must then decide whether or not legal action is worth it for them. If they believe they have a chance of collecting, collection agents can initiate legal action.
They are required to serve you with notice of the legal action (although if they don’t have your current address, you may not receive notice). In most parts of Canada at least 21 days notice is required.
On the appointed day, a court hearing is held. In most cases, if you owe the money, the judge will determine that you owe the money, and will sign a Judgment – a legal document saying you owe the money.
With a judgment it is now possible for the creditor to commence garnishment proceedings, and begin taking a portion of your paycheque.
Once a garnishment is started, it will only stop if you get a court order to stop it (which is unlikely, since the court started it in the first place), or if you pay it in full, or if you file a consumer proposal or declare bankruptcy.
If you believe a creditor will be taking you to court, or has already obtained a judgment, we strongly recommend that you contact a trustee for a free consultation. He/she will review your options and advise you how to deal with collection agents.
Read our article on Canadian debt collection laws.