What to Do if a Debt Collector Threatens to Force You Into Involuntary Bankruptcy?

Can a Debt Collector Force Me Into Bankruptcy?

Creditors and debt collection agencies who are hungry for your unpaid debts may seem relentless. Even though these agencies are persistent and intimidating, they still have rules they are subject to.

You may be wondering: can I be forced into bankruptcy by a creditor? We’ve boiled it down for you below. Read ahead to learn more about what creditors can and cannot do.

What Is Bankruptcy?

Bankruptcy is a legal process that is described in the Bankruptcy and Insolvency Act (“BIA”). It is appropriate if an individual is unable to resolve their financial difficulties by other means. Upon declaring bankruptcy, the Licensed Insolvency Trustee (“LIT”) will take possession of the bankrupt’s assets (except those exempt from seizure by law), sell them and distribute the funds to the creditors. Bankruptcy terminates, upon discharge, most, if not all, of an individual’s debts.

To declare bankruptcy, one must: not be in bankruptcy; owe at least $1,000; not be able to make regular payments as they become due; or, have debts that are greater than the realizable value of their assets.

Typically the Debtor voluntarily files the assignment in bankruptcy.

Can a Creditor or Debt Collector Force You Into Bankruptcy?

A creditor can, pursuant to section 43(1) of the BIA, make an application to Court for a bankruptcy order against an individual or corporation. The applicant creditor(s) must be owed $1,000 or more and the application must allege that the Debtor has committed an act of bankruptcy within the preceding 6 months. An act of bankruptcy is defined in section 42 of the BIA, which includes the Debtor has not paid their debt as it came due.

In the event the bankruptcy order is granted by the Court, the Debtor will be assigned into bankruptcy and an LIT will be appointed to administer the bankruptcy.

Even though a creditor can make an application to the court to start the bankruptcy process, it doesn’t mean they will. This process is not the normal course as there are significant legal costs associated with making an application to the Court. In order for a creditor to pursue this option, it would require a significant amount of debt owed.

Actions Debt Collectors Legally Can’t Take

Debt collectors often use intimidation tactics to try to coerce you to pay off your debt. Don’t let them cross the line – they still have rules that they are required to follow. Below, we’ve listed a few tactics that they are legally prohibited from taking.

Lie to You

Some debt collectors may use false information or fake documents to trick you into paying a debt you don’t really owe. If you receive anything questionable, verify that the debt is actually real, and in the correct amount before responding.

Debt collectors are not allowed to present false information or pretend to work from a government agency. This is a form of fraud.

Threaten You

Creditors and collection agencies are not allowed to make certain threats against you. For example, they cannot claim that you have committed a crime and threaten arrest or jail time. Remember, creditors and collection agencies do not have the powers that a judge or jury would.

Harass You

Legally, creditors and collection agencies cannot use harassment tactics, like calling you repeatedly or using certain language. If you demand so in writing, they cannot contact you at work, unless they are confirming your employment status with your employer.

They also cannot publicly shame you or use tactics meant to embarrass you.

Contact You During Certain Times

Creditors and collection agencies cannot contact you before 7:00 a.m. or after 9:00 p.m., Monday to Saturday, or before 1:00 p.m. or after 5 p.m. on Sundays. They cannot contact you on holidays.

What Should You Do If a Debt Collector Threatens You?

Do you think a debt collector has overstepped their boundaries? You may choose to take one of these routes to get them off your back.

File a Complaint

If you believe that a debt collector is overstepping their boundaries, you can file a complaint against them. First, you must inform the agency of your complaint. You can file complaints through your province’s official government website. They may reach out to you to ask questions about your case, so make sure you keep records of your communications with your creditors.

File For Bankruptcy or Pursue a Consumer Proposal

You may decide that bankruptcy is, in fact, the right option for you. However, first, you may wish to consider a consumer proposal. This option allows you to pay off your debt under different circumstances. With a consumer proposal, creditors can agree to reduce your debt load and allow you to repay the remaining balance over time, interest-free. With this option, you would work with an LIT, who would act as a third party between you and your creditors.

If you would like to resolve your debts, consult with an LIT, who will review all options available to you.


Ultimately, debt collectors have a series of tactics they use to get you to pay off your debt. Remember, they cannot force you to go into bankruptcy, but they can make an application to Court for a bankruptcy order to start the process.

If you are feeling pressured by debt collectors, consider speaking to an insolvency professional who can help you develop a personal financial solution to resolve your debts.

Baker Tilly Ottawa Ltd. is a Licensed Insolvency Trustee and Consumer Proposal Administrator. Its professionals have assisted thousands of individuals successfully resolve their debt crises and overcome financial turmoil since 2002. Its passion – its mission – is your health and well-being!