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How Long Can Debt Collectors Try To Collect In Canada

How Long Can Debt Collectors Try To Collect In Canada

Blog
6 minutes
Jul 11, 2022
Blog
6 minutes
Jul 11, 2022

How Long Can Debt Collectors Try To Collect In Canada

If you have missed payments on your debt, chances are you might have come across debt collectors calling you to ask about your payment plans. Have you ever wondered how long they can go after you? What are some measures they can use to try to collect the debt you owed? Do they just go away after a certain period of time? This article will help answer some of these questions and will help you prepare better in case you ever fall into this situation.

How Long Can Debt Collectors Try To Collect In Canada

Debt collection calls can be embarrassing and frustrating especially if it is recurring. Unfortunately, there is no limitation on the duration for your creditor to keep asking for their money. They have the right to keep calling you until you pay up.

 

How Long Can Debt Collectors Try To Collect?

The simple answer to this question is forever. A creditor has the right to the repayment of his/her money and can keep on requesting for the repayment for as long as possible until it is paid. As long as nothing illegal is done or no rule is broken, a creditor can keep asking for his/her money indefinitely, till it is paid.

 

However, there are periods when you may not hear from the creditors again. This does not mean you are out of the woods yet. Sometimes, creditors, which may include individuals and financial institutions, may sometimes transfer the responsibility of debt collection to an institution/debt collection agency. These third parties will continue to attempt to recover the unpaid debt from you and you should expect to receive debt collection calls. Some debt collection agencies may even further transfer to other debt collection agencies and the process starts up again.

 

While there is no time limitation on the duration of which debt collectors can try to collect the debt, there is a limitation on the duration if they want to take you to court to collect their debt.

 

What Are The Limits To Debt Collectors In Canada?

Debt collectors are third parties that are employed by the original creditor to help with the collection of debts from the debtor. Creditors usually place the account of a debtor with a debt collector agency for a specific period, usually between 6 months to 12 months. If after awhile, the debt collector was not successful in the collection of the debt, creditors may recall the account and place it with another agency.

 

The general rule is that provinces and the federal government do not have legislations that regulate the activities of a creditor or their debt collectors. This means that the law does not protect you against your creditors who are trying to collect their own debts. It also does not apply to debt collectors directly hired by the creditor. This means that if you are receiving embarrassing phone calls from the creditor or the debt collector hired by him/her, there is nothing you can do about that.  

 

However, the Federal Government has enacted some laws to protect debtors that owe money to federally regulated financial institutions. In other words, if you are receiving debt collection calls from banks or credit card companies, regardless of who employed the debt collector, you can approach a federal regulator to file a complaint.

 

It is also illegal to be receiving debt collection calls from two separate debt collectors simultaneously. This means that it is illegal for a creditor to place an account for collection with different collection agencies. This occurs if the creditor does not cancel the account of the debt or with the first debt collector. It is also illegal for a debt collector to try and collect debt for an account it will not be compensated for. All these occur on rare occasions but it is important to know what the limitations of debt collectors are.

 

What Happens When Limitation Period Passes?

If you have been owing for a while and you keep wondering when the creditor will stop requesting their money, you may be in for a long wait. As discussed earlier, creditors can request their money indefinitely. There is no statute of limitations on how long creditors can try to collect their money. What there is a limit to is the duration of time in which the creditor can sue you. This duration depends on the province you live in Canada and they are contained below:

  • New Brunswick - 6 years
  • Ontario - 2 to 6 years
  • Prince Edward Island - 6 years
  • Quebec - 3 years
  • Saskatchewan - 2 years
  • Yukon- 6 years
  • Newfoundland and Labrador - 2 years
  • Nova Scotia - 2 years
  • Northwest Territories - 6 years
  • Alberta - 2 to 10 years
  • British Columbia - 2 years
  • Manitoba- 6 years
  • All of Canada (federal regulation) - 6 years

 

It is not uncommon to have some debt collectors that continue to harass debtors with legal action well after the limitation period has passed. If you find yourself in such a situation, you can do any of the following:

  • Inform the Agency – It may be a lapse of judgement on the part of the debt collector. Therefore, you can inform the agency and let them know that the statute of limitation has passed for your debt. You can do this via e-mail and keep a record of the correspondence. If you can do this, this will deter the agency from continuously harassing you, especially if it is intentional.
  • Report the Agency - If the harassment from the agency persists even after informing them of the statute of limitation, you can proceed to report them. You can file a complaint with your province’s Consumer Affairs Office.

 

All in all, while creditors and debt collectors have the right to continue requesting repayment of the debt, they do not take legal action against you after the expiration of the statute of limitation, depending on the province you live in.

 

How To Deal With Debt Collection Agencies?

Debt collectors trying to collect their debt are only doing their job as requested by your creditor and the creditor is also on his/her right for asking for repayment. How do you then deal with their persistent phone calls? These phone calls are usually intense but it does not have to be filled with hate and recriminations. Here are a few tips you can adopt when next the debt collector reaches out to you:

  1. Keep Calm – This is the first rule. Debt collection discussion can be quite intense because both sides are trying to make their points. These calls may be used against you if you act violently and it is to your disadvantage. Therefore, it is important to always be calm when speaking to the debt collector. Keep your temper and emotions in check.

  2. Reschedule for A Discussion –When the call comes in, if you are not in a good mood, ensure that you do not rush through the call. If it is not convenient, you can request to discuss another time when you can keep your cool.

  3. Record The Call – Most debt collectors record their calls with you, especially if you react violently. The call can be used against you if the matter goes to court. It is in your best interest to also record the conversation. You should pay particular attention to the following information:

    a. The original creditor
    b. Date and time of the call
    c. Caller’s full name and contact number
    d. Name and address of collection agency
    e. The amount they say you owe
    f. Frequency of calls (including the number of days between calls)

  4. Do Not Admit Liability –This is important, especially during the first few stages of debt collection. You need to confirm the said original creditor and if the debt is indeed yours. Request proof and make sure you do not admit to owing these debts until you seethe proof. Always have it at the back of your mind that these calls are recorded and it may be difficult if you have already admitted to owing.

  5. Do Not Share All Your Personal Details – Make sure you do not share important information with the debt collector. Information like income, investments, assets and employment are what you do not want to reveal to the debt collector willingly. This can be used against you to prove that you are capable of paying the debt you owe. They may have some of your personal details from your credit report, avoid confirming the details. Request a copy of the report before you confirm.

Also, always be on the lookout for calls after the limitation period. If the debt collector threatens you after this period, you may consider reporting the agency to the appropriate authority. Dealing with debt collectors requires smart maneuvers.

 

Exceptions To Debt Collection Limitations

The statute of limitation on debt collection as discussed above is dependent on the province you live in. However, there are some exceptions that this statute of limitation does not apply. In other words, if you owe the following debts, the creditors can bring legal action to retrieve the debt anytime.

  1. Child support or spousal support;
  2. Debts arising from fraud;
  3. There is an ongoing lawsuit initiated by the creditor regarding an unsecured debt against the debtor before the expiration of the relevant limitation period;
  4. Court fines;
  5. Student loans;
  6. Secured debt (i.e., mortgages and car loans);
  7. Unsecured debt where the creditor has obtained a judgment against the consumer;
  8. Monies owed to the government.

How To Consolidate My Debts

How To Consolidate My Debts

Blog
6 minutes
Jul 11, 2022
Blog
6 minutes
Jul 11, 2022

How To Consolidate My Debts

When you have multiple debts, such as mortgages, lines of credit, car loans, student loans, credit card debts etc., it may come to a point where it is difficult for you to track every single one of them, let alone coming up with a strategy to pay them off on time. What you can do is consolidating your debt, meaning putting all your debts together to one source to help you manage them better. You might be wondering how to do that, this article will answer many of your questions on debt consolidation.

How To Consolidate My Debts

Consolidation of debts can be used by people who have more than one creditor. Consolidating your debts simply means merging them into one and paying them off as one debt. This will help you simplify your finances by having just one monthly payment instead of having multiple payments. To achieve this, you will need to approach your creditors and discuss a debt consolidation option.

 

Ways To Consolidate Your Debt

If you have a high debt profile, it will be good for you to consolidate your debt into one to make it easier and faster to pay off. It doesn’t matter if the debts are different or not from the same creditor, there are ways to go about consolidating them. If you have a stack of credit card debts with high-interest rates, school loans, car loans, and high-interest loans, all of these can be consolidated into one debt with are negotiated interest rate. You can manage your debts, pay less in interest and minimize your monthly payment while you ultimately eliminate all your debts. Below are some of the ways you can consolidate your debts.  

  1. Get A Debt Consolidation Loan –Some banks, credit unions and other financial institutions offer debt consolidation loan options. You can check with your bank to know if this is possible. When you approach any of these institutions, the consolidation loan they grant you may be a secured or unsecured loan.

    For an unsecured loan, most banks and credit unions are only willing to lend you around 10% of your net worth which is your total assets minus your total debts. So for example, if you request a consolidation loan of $10,000 but you have a net worth of $10,000,your creditor may only be willing to offer you a consolidation loan of $1,000,which is only 10% of your net worth. Depending on the circumstances of the economy, some creditors may be willing to give you more but it is usually on rare occasions.

    For secured loans, what will determine how much consolidation loan you get is the value of your collateral. This means that the creditor may lend you the maximum money to the tune of the value of your asset. So if you have a brand new car without a loan on it or you just bought a house without a mortgage on it, then the creditor may lend you up to the tune of the value of the asset as a debt consolidation loan. You can always combine assets and use as security for the loan.

    One important thing to note about a debt consolidation loan is that you should have a monthly spending budget so as to avoid getting into further debt while trying to settle an existing debt.

  2. Credit Card Balance Transfer – Credit card accounts are known to offer attractive promotions that you can maximize to consolidate your debt. This is usually suitable for credit card debts. You can pay off your credit card debts with a new credit card. This also amounts to consolidating your credit card debts. The catch with this is that if you are able to do a credit card balance transfer into your new credit card, if you are lucky, with a low-interest rate, this new interest rate will not apply to any new purchases you make off the credit card. Also, this low-interest rate is usually for a promotional period. Therefore, if you are not able to complete your debt payment before the end of the promotion, you may be stuck with the normal credit card interest rate. If you are sure that you will be able to make the total repayment on time before the end of the promotional offer for a low-interest rate, a credit card balance transfer is a good way to consolidate your debt.

  3. Home Equity Line Of Credit – First, to define home equity, it is when you subtract what you owe on your house from its total value. The common misconception is that home equity is the amount of money you have paid off from the value of the property. Your home equity can also be used to settle your debt situation. Depending on how much equity you have in your home, you can borrow against it and use the money you get from it to pay off your debts. The mortgage rules of each province vary. Make sure you know what applies in your province. However, before you increase your mortgage in order to consolidate it with your debts, you can take out a second mortgage at a higher interest rate or you can apply for a home equity loan.

    The advantage of exploring the home equity line of credit to consolidate your debts is that mortgages offer a lower interest rate compared to other loan interest rates. Mortgages can also be amortized over a long period, some as long as 25 years.

  4. Refine Your Debt Payment Strategy – This can be used to support your debt consolidation. Once you have been able to consolidate your debt payments, if they are still in more than one payment, you may have to prioritize which of the debts you can afford to pay first. You can use any of these strategies:

    Pay off the smaller loans first– This will enable you to reduce your overall debt load. The smaller loans are usually easy to clear and clearing them will also give you a sense of accomplishment of some progress and initial success.

    Pay off the ones with the highest interest rates first – This is another strategy you can use. It is advisable to tackle the loans with higher interest rates first and get them off your neck. This is because when debts with higher interest rates accumulate, it makes it difficult to finish paying off a loan. However, debts with higher interest rates are usually the largest debts. Therefore, before you can use this strategy, you must ensure that you can pay off the debts as soon as possible so that they will not be a burden in the long run.

  5. Discuss With Your Creditors – Most debtors are scared of discussing with their creditors. However, this maybe a solution for you. One thing that should encourage you to speak to your creditors is that it is in their best interest to help you find a way to payoff your debt as early as possible. If you are struggling to make the minimum payments on your debts (line of credit or credit card debts), you can always try the option of talking to your creditors. Creditors in Canada usually have programs that can grant you a payment break or lower your minimum payment. Ensure that you fully understand the financial implication of whatever agreement you reach with your creditors.

  6. Speak To Your Family Members -After exploring other options and you are not able to make any headway, talking to friends and family is an option you can consider. Friends and family may be able to rally round to raise the money you need to pay your consolidated debts. However, don’t go asking with an entitlement attitude as everyone has their financial obligations. Besides, loaning money to a family member has its risk because anything can happen such as the family member losing his/her job and making it difficult to pay back. This may not encourage your family members to loan you the money you need. If you are lucky to get a friend or family member that will loan you money to pay off your debts, ensure that you honour your agreements with them.

  7. Talk To a Financial Expert –Speaking to a financial expert can go a long way in giving you a clearer picture of the options you have in consolidating your loan. A reputable financial expert will explain all the options available and give you and tell you the financial implication of each decision. In Canada, the first meeting with a financial expert is usually confidential, objective and free.

    ‍Financial experts also know about debt management and orderly payment of debt programs that can help you inthe consolidation of your debts. These programs vary between provinces and theywill help you consolidate your debts into one monthly payment or creditreducing interest rates in order to enable you to pay your debts faster. Whenhearing about these programs from financial experts will improve yourunderstanding of how to manage your money and avoid putting yourself in thiskindof situation again.

  8. Other Options – If you have tried the various options above but to know success, you can also try some other options to help you pay off your debts. You may consider selling off some of your assets like your car, vacation home, boat, etc. the money you make from the sale can be used to service your debts. You can also consider downsizing your lifestyle in order to save money and have the extra cash you can divert into paying off your debts. No more window shopping, eating out and luxury items. You can also take extra jobs and gigs that will give you extra cash you can use in paying for your debts. Increasing your income will go along way.

What Is Unsecured Debt?

What Is Unsecured Debt?

Blog
6 minutes
Jul 11, 2022
Blog
6 minutes
Jul 11, 2022

What Is Unsecured Debt?

Have you ever heard of unsecured and secured debts? What do they mean? How do you get them? Are they beneficial for you? You can find answers to all your questions on these type of debts below.

What Is Unsecured Debt?

Unsecured debt is generally referred to as monies borrowed without the requirement of collateral to secure the debt. The way it works is that a creditor extends the funds based solely on the creditworthiness and a promise to repay by the borrower.  The most common type of unsecured debt is credit card debt. The credit card issuer grants an overdraft based on the credit score of the user. If you fail to repay your credit card debts, there will be interest on the amount owed which further makes it difficult to settle the debt. Other types of unsecured debt include Personal Loans, Overdrafts, Payday Loans, Lines of Credits, Student Loans, and Department Store Cards.

 

Advantages Of Unsecured Debt?

  1. No Collateral – This is the number 1 advantage of an unsecured loan. The fact that there is no obligation on the part of the borrower to provide an asset to secure the loan is what makes an unsecured loan desirable for most people. This gives the borrower access to the funds without having to look for an asset to use as collateral.
  2. Less Risky – An unsecured loan is typically less risky because you are not using an asset to secure the loan. There is no risk of losing the property you have used as collateral in case you default. This is particularly favourable to a person who might have to use his/her asset as collateral. Unsecured loans are based on trust.
  3. Quick Application Process – Most unsecured loans have an easy application process. A good example is a credit card account. A major reason for the easy process is the absence of collateral which eliminates the need for documentation.
  4. Your Property is Safe – Asides from the fact that you do not need to have collateral to secure a loan, the lender also does not have the right to take your property to offset the loan. At least, not right away. Unsecured loans are extended on the credit worthiness of the borrower. Therefore, there may not be a need to take possession of the borrower’s property because he/she has defaulted.

 

Disadvantages Of Unsecured Debt?

  1. High Risk Higher Interest Rate – In an unsecured loan, the lender takes all the risk which naturally means that the interest rate will be high to cover for the risk and the absence of collateral. This may not be favourable to the borrower because it makes it more difficult to pay back.
  2. Stricter Condition To Qualify –Due to the nature of unsecured loans, the criteria for qualification is usually stringent. They are given to people who the lender is certain will be able to repay the loan. The credit worthiness of the borrower is a very important criterion. The borrower must also show that he/she has a stable job and a steady income that will be able to repay the loan over a specific period.
  3. Limited Funds – Due to the high risk involved in an unsecured loan, lenders are usually not predisposed to extend a high amount of funds as a loan. The amount extended may not sufficiently cover the need of the borrower.
  4. Probability of Incomplete Repayment –There is always the risk that the lender may not recover the full money borrowed in the event of default from the borrower. This is the peculiar thing about an unsecured loan. There is no asset to be that can be used to replace the money borrowed. A lender of an unsecured loan must always be ready for this eventuality.
  5. Controversial Ending – Sometimes, an unsecured loan transaction may lead to litigation or a controversial end. The fact that there is no collateral and the lender does not have the right to seize the borrower's property when there is a default may lead to controversy. A lender may extend funds to a person he/she thinks is creditworthy, but turned out to be wrong. Getting a repayment of the loan may be difficult, especially if the borrower is not being honest. This may lead to threats, controversy and sometimes litigation.

 

What Is Secured Debt?

Secured debt is the opposite of unsecured debt. In other words, when you take a secured loan, you will be required to provide collateral to guarantee the loan in case of default in payment. When there is a default, the creditor can begin a process to seize the asset used as collateral to offset the loan. The most common example is a mortgage. A mortgage is usually secured against the value of your home and where there is a default, the mortgage provider has the legal right to repossess or foreclose the property in order to recoup the credit extended. Other types of secured loans include car loans and bank loans.

 

Advantages Of Secured Debt?

  1. Higher Borrowing Limit –The provision for collateral in a secured loan transaction allows for a higher credit facility from the lender. This is because the asset used as collateral must have been assessed and concluded that it is up to or more than the value of the credit extended. This will benefit the borrower and also put the lender at ease.
  2. Low-Interest rate – The collateral provision in a secured loan makes it possible to have a low-interest rate. Lenders are always predisposed to extending credit with low-interest rates once you provide an asset as collateral. A low-interest rate will make it easier to repay the loan on time. The collateral provision in a secured loan is usually to the advantage of the borrower.
  3. Lower Risk – For the lender, extending credit for a secured loan has a lesser risk because of the provision of collateral by the borrower. The lesser the risk for the lender, the higher the credit limit for the borrower. It’s a win-win. It also accounts for the low-interest rate.
  4. Longer Repayment Period –A secured loan also gives the opportunity for a longer repayment period. Because the credit has been secured with an asset and it also has a low-interest rate, lenders can afford to give the borrower an extended period to settle the loan.

 

Disadvantages Of Secured Debt?

  1. Loss of Collateral –There is usually the risk of losing the asset put down as collateral in the event of a default. In a secured loan transaction, the lender has the legal right to take possession of the asset used as collateral in the event of default of repayment. The lender also has the right to hold on to the title of the asset until the loan is repaid.
  2. For Specific Purposes –Secured loans are usually better suited for a particular project, such as the acquisition of a real estate property, or a major business transaction.
  3. Valuable Asset For Collateral –When taking a secured loan, a valuable asset is usually required as collateral. Such asset must be equal in value or more than the value of the loan. This sometimes makes it difficult for a borrower who does not have valuable property to use as collateral.

 

3 Ways To Get Out Of Debt

Debt is not an easy hurdle to get over. The best advice anyone can get is to avoid debt if possible. Where you find it impossible to avoid debt, it is advisable to have a plan for getting out of it. What makes debt more difficult to repay is the interest rate. Paying a debt with an interest rate means that you most likely will be paying more than you borrowed, especially if you do not pay it back on time. Here are 3 ways you can get out of debt as soon as possible.

  1. Revisit Your Budget – If you already have a budget that sets aside a specific amount to service your debt, you may have to reconsider the budget. This is so that you can adjust the minimum payment you have set to satisfy your budget. Paying more than the minimum will save you money on the interest and enable you to repay the total debt on time. This is one method you can try to help you get out of debt faster.
  2. Debt Snowballing – Asides from paying more than your minimum payment, debt snowballing is another method you can employ to help settle your debt faster, especially if you have multiple debts. The way this method works is that you will divert all your attention to your smallest debt. After repaying that, you can focus your attention on the next smallest debt. This allows you to pay up your smallest debt and move to the next. It is a snowballing method that will help get rid of your debt quickly and also give you a sense of accomplishment as you settle your debts gradually.
  3. Commit Your Extra Cash – You may have a budget for paying up your debt but there will be times when you come across extra cash. Beit from a remote job, a side hustle, cash gifts, inheritance, work benefits, or tax benefits. It is advisable that you divert the extra cash into paying your debt so that you can get it over with. If you do not want to spend all your extra cash on debt, you can split it 50-50 while you use the rest for something fun or you save it.

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