Borrowing money is always a risk – for both you and the creditor. They want to ensure that, should you stop making payments, they will get the money they are owed.
However, many people in Alberta experience harsh debt collection tactics and are treated unfairly. The first step to dealing with your owing debts fairly is to understand the processes used by debt collection agencies.
Here is an overview of the parties involved with credit and debt repayment:
- Creditors will give loans, credits, or other financial agreements to consumers, who are now termed “debtors”
- Collection agencies will work with creditors to collect debts if they are unpaid. Generally speaking, a creditor will enlist the help of collection agency only after they themselves have attempted to collect an unpaid debt.
- Debt repayment agencies will help a debtor negotiate with creditors for repayment of a loan or credit agreement.
- Licensed Insolvency Trustees will work with you to clarify your financial circumstances and debt-relief options, particularly relating to debt and help you make an informed decision as to how to move forward.
If you’re already experiencing difficulties paying your debts or anticipate difficulties in the future, it’s important to reach out to your creditors before they employ a collection agency to assist in collecting the debt, as this will likely adversely affect your credit report. It may be possible to work out a payment arrangement or an alternative solution with your creditors.
Here are some additional notes relating to what collection agencies can do:
- Contact you at home between 7:00 a.m. and 10:00 p.m. in Alberta time.
- Contact your spouse, relatives, neighbors, and friends to obtain your address and phone number if they don’t have it. However, they cannot harass you or any of these people.
- Contact your employer, but only once, to confirm your employment status, business address, and business title.
- Contact you at work to discuss the debt unless you request they do not do this and instead provide an alternate arrangement for contacting you.
Here are some additional notes relating to what collection agencies cannot do:
- Make more than 3 unsolicited contacts to you in any period of 7 consecutive days
- Pursue a non-judgment debt where the last payment or written acknowledgement of the debt is more than 6 years old
- If you have requested details relating to all cash transactions and payments made toward the debt, the collection must cease all collection activity until they can do so if they do not provide the report within 30 days of the request.
Another important factor is that the type of debt (either secured or unsecured) will have an effect on collection efforts. We’ll delve into this further below.
Unsecured Creditors
Unsecured credit agreements are made when you receive credit without promising security (collateral) to the creditor. Common types of unsecured debt include:
- Credit cards
- Lines of credit
- Student loans
- CRA taxes
- loans from Cash Money, Payday Loans, EasyFinancial, etc.
- Bank overdrafts
- Phone and utility bills
It’s no surprise that if you don’t make your payments as agreed, your creditors will contact you for repayment. If you continue missing payments, they may hire a collection agency to assist in recovering this debt. They will likely begin reporting negatively to credit bureaus to note missing payments and continue contacting you for collection.
Creditors and collection agencies may also sue you if you don’t make your payments. If you do not respond to this claim, you will likely be served with a default judgement against you, which may lead to the garnishment of your wages or accounts receivable, writs on your property, and the seizure of your property. If you are sued, do not ignore it. Contact your creditor and pay the claim if you are able, and then file a dispute note (you will have 20 days to file a dispute note). If you’re unable to pay the debt, we would recommend contacting a Licensed Insolvency Trustee to get clarity on your debt-relief options — we can assist you with this. For more information and tailored guidance for legal advice, you may wish to contact a legal aid organization in your province. In Alberta, you can contact Legal Aid Alberta.
If you have an unsecured debt that goes into collection, it’s important to explore all of your options before making any quick decisions.
First, you should obtain a debt verification letter from the debt collector to verify the age, amount, and history of the debt. This letter will indicate who is collecting on the debt.
Compare these details to your credit reports to ensure they are accurate.
From there, you can either choose to pay the debt or dispute it. You can often make an agreement for a payment plan or settle the debt for less than is owed.
If you don’t feel that the debt is justified, you can dispute it.
To find a legal remedy to avoid collections and remove your unsecured debt, talk to a licensed insolvency trustee to explore your options.
Secured Creditors
Secured credit is a type of credit that is backed by a deposit of some kind, usually cash or an item of value used as collateral. Common types of secured debts are:
- Car loans
- Mortgages
- Savings bonds
This provides the secured creditors with “security” should you cease to make payments.
Like any other debt, If you are late with payments or stop making payments on a secured debt, you will receive notices and phone calls requesting the payment of this debt.
If you continue missing your payments, they will look to collecting their collateral — i.e. their “security” — to recover the money. They have a legal right to seize this security and will use a civil enforcement agency to do so. If the value of the security isn’t enough to pay off the debt, they may sue you for the remainder. Earlier, we detailed what this may entail.
If you are at risk of having your property seized due to an unpaid secured credit, it’s important that you talk to the creditor immediately to try and come up with an alternative arrangement.
Paying Off Credit Card Debt in Alberta
If you are worried about your debts ending up in collections (or if they are already there) or losing your collateral in your secured debts, our team at Frederick & Company Ltd. can help you get clarity about your options. Our foremost goal as a Licensed Insolvency Trustee is to help you get clarity on your debt-relief options tailored to your circumstances. Our consultations are always free.
Additional resources and references:
https://open.alberta.ca/publications/what-creditors-can-do-if-you-don-t-pay
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