If you have debts that have spiraled out of control, in Canada you have four options: bankruptcy, a Consumer Proposal, an Orderly Payment of Debt or working with a debt settlement company. Bankruptcy is obviously the “nuclear” option as far as impact on your credit score goes. A bankruptcy stays on your credit report for seven years and will likely keep you from getting approved by a bank or other traditional lender for a mortgage — and may influence your ability to get financing for an automobile and other types of loans as well.
A Consumer Proposal is your attempt to put together a payment plan for your creditors. You file it with the court, and the court and your creditors must both approve it for it to go into effect. If they don’t approve it, you can end up being forced into bankruptcy. An Orderly Payment of Debt works in a similar way. Working with a debt settlement company can be the safest route, particularly if your credit is already poor. A settlement company can negotiate a reduction of your debts, and when creditors indicate that they have accepted a settlement, that brings your credit score down.
Before you choose one of these options, though, it’s good to know about these collection agencies that can end up stressing you out and forcing you to select a disposition before you have to. According to the Canadian Office of Consumer Affairs, there are some key rules that govern the ways collection agencies can operate. They generally start an account by sending you a letter that they have received your account from one of your creditors — maybe a credit card company after you haven’t paid for several months, or a utility company collecting money for an account that you didn’t settle in full before you moved out. Just because you get the letter doesn’t mean that your credit has taken a hit, though. It just means that they are looking into the matter.
If the debt is legitimate, go ahead and pay it if you want to keep the matter off your credit history, or make arrangements to do so. Get any agreement with this agency in writing, and do not send cash. If you don’t write checks, have your bank account drafted or use a credit or debit card, and get a payment letter. If it’s not legitimate, tell the representative from the collection agency, and then follow that up with a letter or email. Then, contact the agency that has sent your name to a collections agency. If that doesn’t work, you can seek relief with the local agency in your province. The purpose of your province’s Consumer Affairs bureau is to protect you from unethical actions by both creditors and collectors. They are not there to protect you from legitimate debts but instead to help you ensure that the debts on your report are accurate and to keep creditors and collectors from harassing you. If you know that you owe a creditor, it’s best to make arrangements to settle that before they refer it to a collector, so that you don’t have to go through the harassment that many creditors employ to get a response.
There are some rules that collections agencies have to follow all across Canada. For example, a collector cannot call you often enough so that it becomes harassment. There are also limits (which vary by province) on the time of day when a collection agency representative can call you.
Surprisingly, even if you are going through any form of debt settlement, mortgage refinancing can be obtained with a private lender in conjunction, provided that there is enough equity and a good plan is in place. Amansad Financial can get you in contact with trusted professionals that can assist in areas of debt settlement so that you can get life back on track.
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