Personal Debt Solutions Canada - Debtor and Creditor Rights

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Debtor and Creditor Rights

Debtor Rights

Exempt Assts - Assets that cannot be Seized by Unsecured Creditors

Each province in Canada has passed different legislation that allows debtors to keep some assets that cannot be seized by unsecured creditors even with a Court Judgment. The intent of these exemptions is to allow a debtor to keep some basic personal assets even if they have some of their assets seized by creditors or even if they declare personal bankruptcy.

Click here for information about what assets you can keep in your province

Dealing with Debt Collectors and Collection Agencies

If you are having debt problems, a collector or collection agency may contact you seeking payment. While they have a right to do so, is doesn't mean you have lost your right to be treated fairly. Understanding how collection agencies work and your rights under the various Business Practices and Consumer Protection Act of each province is an important step in resolving your debt problems successfully.

How Collection Agencies Work

Debt collection agencies act as "agents" for your creditors. They collect debts and may request payment in full when they first contact you because most debts include a clause that renders the remaining amount of debt immediately due and payable if the payments on the debt are late or not being paid at all.

The creditor/collection company may also indicate possible courses of action they could undertake to recover the debt, such as court action. If you have entered into a contractual agreement with a creditor, and have not held up your part of the agreement (i.e. paying the debt) then you are in breach of the agreement and the creditor then can take legal action to recover the debt. However, before your creditor receives any court order, they cannot seize your assets or garnish your wages.

Although debt collection companies do not extend credit, in some cases they may be willing to discuss repayment arrangements. You will likely be required to provide detailed financial information in order for the payment plan to be considered. A financial disclosure outlining all sources of income coupled with all monthly expenses gives the company a clear picture of your ability to pay (something that would be required by you if the case proceeds to court). If a monthly payment schedule is agreed upon , ask for confirmation of the agreement in writing.

You must be given Notice that the creditor or collection agency is proceeding to court to try to get a judgment against you. A judgment is really just a court document signed by a judge confirming that a duty, or debt, is payable from one party (your creditor) by another party (you). Generally, if a judgment is given against you, the amount you have to pay to the creditor will be increased to pay any court costs.

With a judgment against you creditors can do various things including;

In some cases, a creditor may be prepared to accept less than the total amount owed. If you are offered a settlement or have one accepted, the collection agency will provide you with a letter confirming the settlement arrangements BEFORE you are required to pay the settlement amount. Remember: all bailiff and collection companies must be licensed in your own province, regardless of what province they are calling from.

Creditor Rights - Secured Creditors

Some creditors will loan money to you with the understanding that if you default on the loan, then they can seize or take your assets in lieu of, or in addition to the debt.

Personal property pledged in this way is deal with differently in each province in Canada. Generally, in most provinces secured personal property (i.e. property belonging to an individual and not a corporate entity) such as a vehicle or furniture has specific rules with respect to having it reposed or seized by a bailiff. If a creditor intends on realizing on this type of security is usually done by utilizing a bailiff to seize the asset(s). Care should be exercised and your personal situation should be reviewed by one of our member Trustees or a lawyer to ensure the proper steps have been followed.

If you file for bankruptcy or file a Proposal under the Bankruptcy and Insolvency Act in Canada, you are immediately protected from further prosecution (seizure of your assets, garnishment of your income etc) by a what's called a Stay of Proceedings. This Stay however, does not apply to secured creditors such as banks holding, for example, a lien on a car or your mortgage on your house.

For Secured Creditor rights in BC click here.

Statute of Limitations

The Federal Government and the Provinces have Limitation Acts which provide a limit on the time an unsecured debt survives. If an unsecured debt is not collected or payments are not made on the unsecured debt then after a certain time no legal action can be taken to collect the debt.

For Civil law, Canada provides a statute of limitations for uncollected debt (each Province is somewhat different). In 2003, the Canadian Supreme Court decided (Markevich v. The Queen ) that future debt could not legally extend beyond six years. Parliament subsequently changed this provision and increased it to a 10-year period.

Examples from various provinces and the Federal Government: