collection agency

What Should You Do if You Get a Call From a Collection Agency?

  • By Leigh C. Taylor, LIT

If you owe a debt, such as a credit card, a line of credit, a car loan, or even a utility bill, and have been unable to pay that debt for a number of months, it is very likely that you have received a telephone call from a debt collector. Also known as a collection agent (likely working for a collection agency), it is their job to attempt collection on an unpaid debt.

Sometimes they are doing this on behalf of the lender that the funds are owed to, or sometimes they are doing it on their own behalf after having purchased the debt from the original creditor. In either case, they have one primary goal: to maximize the amount that they can persuade you to pay towards this debt.

Their primary and most persistent means of contacting people seems to be over the phone, but sending letters is another common tactic. These communications are intended to convince you that paying this particular debt should be your first priority, and that a terrible fate will befall you if you do not.

But is it true? Is it in your best interest to pay them, even if you have the money to do so? What can they do if you don’t pay them? And what other alternatives do you have?

What are the Effects of Having a Debt in Collections?

The immediate effect of having a debt in collections is two-fold. Firstly, it means that you are going to be subjected to the phone calls and letters noted above. Remember that collection agents are generally paid on a commission. The more they collect, the more commission they earn. This means that once they have your file, they are likely to remain very persistent in their collection attempts.

The second effect of having a debt in collections is that your credit rating is going to take a blow. A poor credit rating will affect your future ability to get credit cards, a car loan, or a mortgage on a home. If it is possible, you will want to clear off the negatives from your credit rating as soon as possible, all else being equal.

What is the Best Way to Resolve a Debt in Collections?

Unfortunately, the action that stops the persistent collections can prolong the poor credit rating. The fastest way to put an end to the collection calls is to pay the debt. If you pay them, they won’t have a reason to contact you any further.

However, doing so may, in some situations, extend the period for which the debt in collections has a negative impact on your credit score. Items on your credit report tend to get updated or refreshed whenever something occurs that changes the amount and/or nature of the debt.This includes when:

  • additional funds are advanced to you
  • a payment is made
  • the debt is placed with a collection services company, or being transferred between collection agencies.

The two large credit reporting agencies in Canada, Equifax and Transunion, both state that when a debt goes into collections and/or is written off by the original lender, this fact stays on your credit report for a further six years. However, their wording, at least on the Equifax link, makes it sound possible that a payment on a debt in collections, be it a full or a partial repayment, could “reset the clock” and the six year reporting period would begin anew.

Thus, depending on how long the debt has been in collections before you consider paying, it may not be in the best interest of your credit score to make a payment. For example, if it has been five years since the debt first went into collections, you may be better off enduring a further year of your credit report showing an unpaid debt in collections – rather than it showing, for a further six years, a paid debt that had to be sent to collections.

You would need to weigh the pros and cons of each scenario, as well as the other considerations involved, such as the bothersome collection calls and letters.

Can the Collections Company Sue?

Of course, having a debt with a collection agency may lead to bigger issues than just annoying phone calls and a poor credit score. Depending on the age of the debt in question, the collection company may be able to sue you in an attempt to force payment of the debt.

A successful lawsuit by a debt collector would allow them to obtain a judgment from the court. This gives them the right to pursue a garnishment order redirecting a portion of your wages to them for repayment of the debt, or to even place a lien on your property or other assets.

How Long Can They Collect on a Debt?

Legally, a judgment can only be obtained with regards to a debt that is not yet old enough to be barred by a statute of limitations. Once a debt has reached the required age under your province’s statute of limitations, a judgment can be prevented by pointing out to the court that this limitations period has been reached.

In Manitoba, this period is currently six years. That means that, after six years, the debt can no longer be collected on. However, a new Limitations Act is set to come into effect on September 30, 2022. Once in force, The Limitations Act will reduce the limitations period in Manitoba to two years, in line with other provinces, including Ontario, where we have our Kenora office.

Both the old and new limitations periods are based on the time since the last payment.  Therefore, if you make a payment on an old debt, you are resetting the limitations period and opening yourself up to a potential suit from the collection agency pursuing the debt. That said, something to remember is that creditors can continue to contact you regarding collection and payment even after the limitations period has been exceeded.  You still legally owe the debt, regardless of whether or not the creditor could successfully obtain a judgment.

Find out what collection agencies can and cannot do in this informative podcast.

Are There Other Options Available?

Of course, this discussion of whether you should or should not pay a debt collection agency is irrelevant if you don’t have the means to pay them anyway. If that is the case, or even if you do have the money to pay but aren’t sure if it is in your best interest to do so, the wise thing to do is to reach out to a Licensed Insolvency Trustee, such as us here at LCTaylor.

We provide a free, no-obligation consultation, and are happy to discuss all of your options with you.  Alternatives to the above options of paying the collector, or waiting them out and letting the limitation period expire, include filing a Consumer Proposal to your creditors or a Bankruptcy.

Each potential solution to problems with debt collectors has advantages and disadvantages, so it is best to be informed and make the right decision for your unique situation.  For free information, please give us a call at 204-925-6400 or email us at

Leigh C. Taylor, LIT

Leigh has been working in the insolvency field since 1975. He is a graduate of the University of Manitoba. Leigh began his career as an Official Receiver with the Office of the Superintendent of Bankruptcy. He is a Certified Professional Accountant, and he attained his license as a Licensed Insolven Read More Leigh has been working in the insolvency field since 1975. He is a graduate of the University of Manitoba. Leigh began his career as an Official Receiver with the Office of the Superintendent of Bankruptcy. He is a Certified Professional Accountant, and he attained his license as a Licensed Insolvency Trustee in 1980.Leigh has been a member of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) since its inception. He is a Past President of several organizations, including the Manitoba Association of Insolvency and Restructuring Professionals (MAIRP), the Armstrong Point’s Association, and the Manitoba Opera. In addition, he has served for numerous years in leadership roles in Winnipeg churches. Close


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