How to Respond to Creditors: Dealing With Credit Companies and Collection Agencies

When debt payments slip, anxiety rises—and so do creditor calls. Collection agencies, debt collectors, and even the Canada Revenue Agency (CRA) are all entitled to collect. But as a debtor, you have rights too. In this guide, we will talk about creditor collection, debtors’ rights, and what you can do to manage your debt with the help of a Licensed Insolvency Trustee (LIT).

Who Are Creditors?

Creditors are individuals, businesses, or financial institutions to whom you owe money. Some of the most common include:

• Credit companies: Banks, credit card companies, payday lenders
• Collection agencies: Firms hired to recoup or buy unpaid debts
• Debt collectors: Agents who work for creditors
• The Canada Revenue Agency (CRA): Government collection of tax debts, unpaid GST/HST, and government overpayments

What Happens When You Fall Behind on Debt Payments?

Your creditor may attempt to contact you directly via phone, email, or mail if you miss payments. They have several options when they can’t make contact:

• Send a debt collection notice.
• Have a collection agency collect the money.
• Take you to court, which can result in a court order for wage garnishment or asset seizure.

For tax debt, the CRA can take more aggressive action. They can garnish your wages, freeze your bank account, or place a lien against your house.

What Are Your Rights When Dealing With Creditors?

Canadian law limits what debt collectors and creditors can do. Knowing your rights will make you feel more confident when you respond.

What creditors and collection agencies cannot do:

• Call you at unreasonable hours (they can only contact you Monday through Saturday between 7:00 a.m. and 9:00 p.m., and Sundays between 1:00 p.m. and 5:00 p.m.), or contact you on holidays
• Harass, threaten, or intimidate you
• Discuss your debt with your family, friends, or employer (except if they’re a co-signer)
• Impose unauthorized fees or interest not included in your original contract

You have the right to:

• Ask for written confirmation of the debt before you pay
• Request all communication in writing instead of by phone
• Seek advice from a Licensed Insolvency Trustee or financial advisor
• Make a complaint if a credit company or a collection agency is not adhering to consumer protection laws

For more information on debt collection laws in your province, check the Government of Canada’s guide.

The Statute of Limitations on Debt

The statute of limitations is another Canadian right that can protect debtors. There is a time limit on how long a creditor or collection agency can try to get a court order to recover the debt. The time limit, in most provinces, is between two and six years from the last payment or recognition of the debt.

This does not mean the debt disappears—it is still there, and the creditors may still pursue you. But once the limitation period has run, they cannot successfully sue you in court to recover the debt. No wage garnishment, freezing of bank accounts, or seizure of property can lawfully occur after this point, unless you restart the clock with a payment or written admission of owing the debt.

If you’re being coerced to pay an outstanding account, find out if it’s within the Statute of Limitations where you live. Knowing this information can spare you unnecessary anxiety and or paying what you no longer legally owe.

Responding to Creditors and Collection Agencies: Step-by-Step

If you’ve received a debt collection notice or are dealing directly with a creditor, here are six actions you can take:

1. Stay calm and never ignore your creditors:

It may seem easier to avoid the calls, but creditors will not disappear. On the contrary, it can lead to legal action.

2. Validate the debt

Before agreeing to any debt settlement, ask the creditor or collection agency to send written verification. Check the debt amount, the creditor’s name, and whether the agency is authorized to collect in your province.

3. Know your debt repayment options

Try to negotiate directly with the creditor for reduced payments or interest. You can also make a debt repayment plan through a credit counselling agency, or explore debt relief options like a Consumer Proposal or Bankruptcy through a Licensed Insolvency Trustee.

4. Request written communication

If the phone calls lead to undue stress, you can ask that all communication be done in writing, which has the added benefit of a clean paper trail.

5. Protect your credit score

Late payments and collections will impact your credit rating. However, filing a Consumer Proposal or working on a repayment plan will ultimately help rebuild your credit.

6. Seek professional help

If you’re being harassed by creditors or threatened with wage garnishment, call a Licensed Insolvency Trustee. They’re Canada’s only federally licensed professionals who can stop collection calls and provide legally-binding solutions. You can find out more about stopping collection calls in this article: How to Stop Debt Collectors from Calling.

What if Creditors Sue You?

When you ignore a collection agency, they can escalate things. A creditor may petition the court for a requirement to pay order. This allows them to garnish wages, freeze bank accounts, or seize property.

If you have received a notice of legal proceedings, take the following steps:

• Contact the court immediately to determine what you must do.
• Consult a Licensed Insolvency Trustee for advice.
• Look into legal debt settlement solutions, such as a Consumer Proposal, that have the effect of staying enforcement proceedings.

Debt Relief Solutions When Creditors Are Involved

If repayment is impossible, more structured debt relief plans can protect you from creditors.

Consumer Proposal

• Filed through a Licensed Insolvency Trustee
• Allows you to settle debts for less than what you owe
• Stops collection calls, wage garnishment, and lawsuits
• Protects assets like your home and car

Bankruptcy

• Also filed with a Licensed Insolvency Trustee
• Eliminates most unsecured debts
• Provides the fastest debt relief, but with a greater impact on your credit score
• May require you to surrender some assets, depending on provincial exemptions

If you need peace of mind and a stop to the calls only a Consumer proposal or Bankruptcy filed through a Licensed Insolvency Trustee can legally stop creditors. Other solutions can help manage debt but cannot guarantee a stop to collection activities.

Final Thoughts: Being in Control When Creditors Call

Having to cope with creditors, debt collectors, or the CRA can be intimidating, but you are not defenseless. By knowing your rights, responding calmly, and exploring alternatives such as debt repayment proposals, Consumer Proposals, or Bankruptcy, you can take charge of your financial future.

At Adamson & Associates, our Licensed Insolvency Trustees help Canadians find lasting solutions to debt stress. If you’re struggling with creditor calls or worried about legal action, we’re here to help.

Contact us today for a free, no-obligation consultation and take the first step toward financial freedom.