Can a collection agency sue me in Canada?
Can a collection agency take me to court?
In simple terms: yes. A creditor has the right to take you to court and sue you if you have stopped making payments on a debt that you owe. However, depending on how old the debt is, they may not legally be allowed to do so.
Every province and territory across the country has different Canadian collection laws with various statutes of limitation on when a creditor can sue a debtor. A Licensed Insolvency Trustee can advise you of the laws in your province.
- To learn what the statute of limitations is in your area, we strongly recommend that you contact a Licensed Insolvency Trustee and discuss your situation with them. Your first meeting is always free.
Collection Agency FAQ
Can a collection agency take you to court?
Yes, a collection agency that has bought the debt from the creditor can take you to court, as can a creditor themselves. However, you will seldom be taken to court for a debt that is less than six months overdue.
Creditors and collection agencies may also threaten to take you to court, even if they do not intend to do so. It is expensive for a creditor or collection agency to sue you; they will only do it if they believe your debt is large enough to justify this expense, or that your assets are great enough that you can pay the debt if ordered to do so by the court.
Also, creditors and collection agencies must heed the statutes of limitation that apply in each province. If a debt is old enough, it cannot be recovered through the court. A Licensed Insolvency Trustee is the best person to advise you on your province’s particular regulations – see also this page: Canadian Debt Collection Laws.
What happens when my creditor takes me to court?
You have stopped making payments and your creditor or a Canadian collection agency is preparing to sue you. Here is what will happen:
Your creditors will file the lawsuit with the court. You will be notified of this. If you fail to file a defense against the lawsuit, your creditors will automatically win by default. To learn how to defend yourself, contact a lawyer or a Licensed Insolvency Trustee.
If you decide to file a defense, a trial date will be set. You or your lawyer will attend, as will the creditor/collection agency or their legal representative.
The trial will have one of two outcomes:
- Your creditor/collection agency will be successful and will obtain a judgement against you, in which the court orders you to pay all or part of the debt. This gives your creditor certain powers, such as wage and bank account garnishment.
- You will be successful, and no judgement will be awarded.
Can a collection agency take my house?
If they have been successful in getting a judgment against you, a creditor or collection agency can file the judgment in the local Land Titles office against your home or other real property. This process is also known as “registering a lien.” If you do not pay the judgment, they can eventually obtain a court order to sell the real property.
Within provincial regulations, certain creditors like banks and finance companies can seize property on which they hold a defaulted mortgage, without a court process. Canada Revenue Agency can also apply a lien against your property for unpaid taxes, without a court process.
Can collection agencies garnish wages?
Yes, if they have obtained a court judgment against you. The amount they can garnish and how that garnishment will be handled depends on what type of debt you owe, where you live, and your income. To learn how much money could be garnished from your wages, talk to a Licensed Insolvency Trustee. See also this page: How To Stop a Wage Garnishment.
Can collection agencies charge interest in Canada?
No, a debt collection agency cannot charge new interest to you on the debt they are attempting to collect. However, the amount they are attempting to collect may include interest assessed by the original creditor.
Can a collection agency take money from my bank account
Collection agencies can garnish your bank account if they have obtained a court judgment against you. Wage and bank account garnishments are particularly worrisome because they can happen unexpectedly and cause you to default on other planned payments. Again, the rules vary depending on your situation and province. A Licensed Insolvency Trustee can help you avoid or end garnishees and move forward.
Learn more about Debt Collection Agencies from the Government of Canada’s Consumer Affairs office: Debt Collection Agencies.
How to Deal with Collection Agencies in Canada [H2]
If you’ve stopped making payments to your creditors, they have the right to take you to court. Before that happens you can take action to stop the process, with one of these steps.
- Talk to a Licensed Insolvency Trustee. In a free, no-obligation meeting, a Licensed Insolvency Trustee can help you review all of your options and arrive at the best solution for your situation. Licensed Insolvency Trustees are regulated by the government and are experts in their field.
- Make a deal with your creditors. Call the people you owe, and see if they will work with you to arrive at a payment plan that works for both of you.
- Make a Debt Management Plan. A credit counselling agency can help you through the process. Be careful which agency you choose – they are not regulated in most provinces.
Going to court is a daunting experience. Having an expert on your side who understands Canadian collection laws and who can outline your options, or who can stop the process of debt collection entirely could make all the difference. Talk to a Licensed Insolvency Trustee and get the professional advice and help you need.
