Nobody wants to deal with a debt collector. But if you are extremely behind on a credit card bill, a personal loan, or a medical debt, your debt may be “written off”, and sold to a collections agency.
When a bill enters collections, it can negatively impact your credit score, reducing your ability to qualify for auto loans and lines of credit. It can also be scary, because debt collectors often threaten you with fines or jail time if you don’t pay. But don’t fall for these threats. In this guide, we’ll give you a step-by-step guide on what to do if a bill enters collections in Canada.
1. Stay Calm, And Wait For Debt Verification
You’ll typically be contacted by a collections agency after 180 days of delinquent debt. First, understand that you have the right to a debt validation letter, which will usually be delivered within a week of being contacted by a debt collector.
You should wait for this letter to arrive before you take action on the debt, like working out a payment plan. There is a chance that it’s inaccurate or invalid.
2. Get The Facts About The Debt
After you get a debt validation letter, take a detailed look at it. You should be able to see details such as the age of the account, the amount of the debt, its history, and the information on who sold the debt – as well as the agency that is looking to collect it.
Consult your bank statements, credit card bills, credit reports, and other records to corroborate the specifics included in this letter, and ensure its validity.
3. Know Your Rights, And What Constitutes Illegal Treatment
In Canada, you have rights when it comes to your treatment by debt collection agencies. By law, collections agencies cannot:
- Try to collect a debt from you without first putting it in writing and making a reasonable attempt to deliver it to you
- Start legal action against you to collect debt without notifying you
- Harass you or your family by calling at certain prohibited times (which vary from province to province)
- Provide you with false or misleading information
- Communicate with you without identifying themselves, or saying to whom the money is owed
- Demanding payment if you claim not to owe money, without taking reasonable steps to ensure that you do, in fact, owe money to the agency
- Contacting your employer, friends, neighbours, or relatives for information other than your telephone number or address.
It’s best to record all of your interactions with debt collectors. You can contact the office of consumer affairs in your region if you feel you are being treated unfairly.
4. Work Out A Payment Plan (And Get It In Writing) Or Dispute The Bill
Usually, you can’t afford to repay your debt all at once (or you wouldn’t be in this situation). Most collections agencies are happy to work out a repayment plan. You can contact them and negotiate this plan. Make sure to get the details in writing, as a legally-binding contract.
If you feel the bill is incorrect, you can also dispute it. For example, if it’s not your debt, or you paid it off with the original lender, the agency must stop asking for payment, and take steps to verify that the bill is valid. You can provide proof of payment and other documents to help verify this.
5. Understand How Your Credit Is Affected
When a bill enters collections, your credit can drop steeply. The account will remain on your credit report for up to 7 years. In some cases, the account will no longer affect your credit once it’s been paid off. In some cases, you can get a collections agency to remove this negative item once your bill has been paid, and it’s best to do so, to ensure your credit can “bounce back”.
Know What To Do If Your Bills Enter Collections!
Having a bill enter collections is never a good thing. But with this guide, you’ll be able to deal with this negative mark on your credit account, and recover.
Even if you have bad credit due to outstanding collections accounts, though, you can still get a great deal on a used car! Come to Ride Time in Winnipeg today to learn more! If you’re employed, a licenced Canadian driver, and meet our income threshold, we can help you get a car, no matter what your credit score may be.