Likely the most stressful part of financial difficulties is dealing with collection agencies. The endless calls and letters, threats, even the manipulation that a debtor experiences is often overwhelming. Collection agencies must follow certain rules when they attempt to collect money, but it can still be difficult dealing with them.
If you’re having trouble with collection agencies in Manitoba and aren’t sure what to do, these tips will help:
Know Your Rights
In Manitoba, it’s against the law for collection agencies to harass or intimidate you in any way, including:
- Calling before 7 am or after 9 pm, on Sundays, or on holidays
- Threaten to repossess your belongings, or try to, without proper authority and registered security on the items being repossessed.
- Call or harass your family or workplace to attempt to locate you
Understand that collection agents are generally paid on a commission and may provide misleading information in an attempt to collect. If a collection agency is behaving abusively or harassing you, you can contact the Consumers’ Protection Office on Manitoba, at (204) 945-3800, or email@example.com
Get Verification of the Debt
By law, a collection agency must write to you and tell you the following:
- How much you owe. The statement should specify how much of the debt is the principle, and how much is interest, what the original debt was, and it should note any payments that you have made.
- The identity of the original creditor. For example, sometimes when you purchase something like furniture, with “no payments for 12 months”, the creditor with whom you made that arrangement sells your debt to another creditor for collection.
- Proof of their right to attempt to collect money. If the amount you owe or the debt is in question, you can request verification. You can also request a copy of the original signed contract. By law, they must provide it.
If you do owe them money, you can sometimes negotiate to pay a smaller amount. Most collection agencies will consider this. If you can negotiate for less, make sure you don’t pay them until you get an agreement from them in writing. A verbal agreement is not binding, and it is unlikely that the collection agency will honour one.
Seek Professional Help
If you can’t afford to pay your debts and you want to end the constant calls from collection agencies, it may be time to seek professional help. The only way to legally stop collection activity (including calls, letters, or wage garnishment) is to file either a Consumer Proposal or a Bankruptcy. The only professionals in Canada that can assist you with either of those are Licensed Insolvency Trustees (LITs). To determine which of those options would work best in your situation, you would need to meet with a LIT to go over your financial situation in detail. A great deal depends on your family situation, your income and whether it is secure in the long term, your assets, who your creditors are, and how much you owe them. The good news is that an initial consultation with a LIT is free, so you can explore the options without cost or obligation.
With a Consumer Proposal, you agree to pay a portion of your debt, over a prescribed period of time, to the LIT, who then distributes the money to your creditors. The proposal will deal with all of your unsecured debt. You and your Trustee will first determine if a Proposal was viable in your situation — that is, can you afford payments and for how long? Because of their experience in this process, your Trustee will be able to advise you on whether the amount you can afford to pay is likely to be acceptable to your creditors. You will be essentially settling your debt for less than you owe.
Once you have decided to proceed, your LIT contacts your creditors with the proposal. The creditors have the opportunity then to vote for or against the proposal. If it is accepted, it is binding on all of your unsecured creditors. You then make one payment each month to your Trustee until the agreed amount is paid off.
A Bankruptcy is a solution for people who cannot afford to make payments to their creditors, who do not have secure long term income, or who, for some reason, need to get out of debt quickly. While a proposal can last up to 5 years, a first-time bankruptcy is completed in 9 months unless you have some short-term ability to make payments, in which case, the bankruptcy would be completed in 21 months.
The biggest difference between a Consumer Proposal and a Bankruptcy, however, is in how they deal with assets. Technically, what you are doing when filing an Assignment in Bankruptcy, is you are signing over everything you own, have a right to, or an interest in, to your LIT for the benefit of your creditors. Manitoba legislation, however, makes most of your assets exempt from this. Your household furnishings and personal effects, registered pensions and RRSP’s, tools of your trade, including a motor vehicle, and your home all have exemptions. If you did have an asset that was not exempt, your LIT could sell that asset, if it has value, and distribute the proceeds from the sale to your creditors. Your debts are discharged at the end of the bankruptcy.
There are a few debts that are not discharged in either a Proposal or a Bankruptcy: fines and penalties of a court; alimony and child support; student loans that are less than seven years old; and any debt that is the result of fraud or misrepresentation.
Only a Licensed Insolvency Trustee can offer the powerful debt-relief options of Consumer Proposals or Bankruptcies. Give the LITs at LCTaylor a call today, and they can help you decide your best option to stop collection agencies. They can put an end to collection attempts and help you get back on your feet.