Getting Hounded For Your Unpaid Debt? Consider These Tips
Having debt itself is quite stressful. Being unable to pay off your debt makes it worse – and being pursued by debt collectors can feel like a full-fledged nightmare.
Whether you’ve already received a Statement of Claim or a debt collector has threatened to take legal action against you, the possibility of getting sued over your debts can be frightening.
Read below to learn about the steps you should take when facing legal action over your unpaid debts.
When a Creditor Can Take You To Court For Unpaid Debt
It is not uncommon for a creditor to sue you for failing to pay off your debt – but it is typically not the first course of action used to collect the debt.
During the first 3-6 months following unpaid debt, creditors will request payments from you via phone calls and written notices. You may even receive a letter that appears to be written by a lawyer. If this letter does not imply immediate legal action, it is likely a mass-produced document created with the intention of intimidating the reader into paying what they owe.
After 6 months, creditors may pursue you more aggressively. They may assign your file to a collection agency, sell your account, or even sue you.
Since lawsuits can be costly, this process will be limited to certain situations. Creditors typically sue when the following criteria are true:
- You owe a lot of money – usually more than $5,000
- The statute of limitations hasn’t expired
- You own property in your name
How Do You Know If Legal Action is Being Taken Against You?
When a creditor sues you, you’ll receive a Statement of Claim. This is a legal document that comes as a physical, written document, usually served at your front door.
A Statement of Claim should have a seal from a recognized court on it, as well as information from the plaintiff – usually the bank, a creditor or collection agency.
What is a Statement of Claim?
A Statement of Claim is a document that informs you that you are being sued. It will tell you who is suing you, what you are being sued for, and what steps you are required to take. This is a provincial document, meaning the circumstances of a Statement of Claim may vary by which province you live in.
What to Do When You Receive a Statement of Claim For Unpaid Debt
Consult with Legal Counsel
Upon being sued for credit card debt, you really have three options: let the creditor win by default, file a defense to the lawsuit by representing yourself, or file a defense to the lawsuit with the assistance of a lawyer.
If you choose to fight the lawsuit and file a defense, we recommend hiring a lawyer. Your chances of having a successful outcome increase greatly when represented by a legal counsel – they have a good understanding of the ins and outs of debt-related lawsuits, and will come up with your best line of defense and argue it for you.
Respond to the Statement of Claim
There’s a good chance that, upon receiving a Statement of Claim, you ask yourself this question: should I respond to it, or ignore it?
There’s an easy answer to that question: don’t ignore your Statement of Claim! Respond to it within the allotted time frame, filling out everything you are required to. If you ignore a Statement of Claim the court will issue a default judgement against you, automatically taking the plaintiff’s side.
Meet with a Licensed Insolvency Trustee
A Licensed Insolvency Trustee (“an LIT”) is a federally-regulated financial advisor who can help you with issues involving debt and creditors.
Specifically, you can file for a consumer proposal to deal with your debt, which requires all debt-related legal action against you to cease. With a consumer proposal, an LIT works with you to come up with a compromise for the debt you owe. The LIT will send the consumer proposal to your creditors, and will act as a third party and liaison between you and the creditors.
Often, the terms of the consumer proposal will allow you to pay off a reduced portion of your debt with affordable payments made over a set period of time.
File For Bankruptcy
If you are completely unable to pay off any debt, you may file an assignment in bankruptcy. You will need to consult with an LIT before taking this step.
This process halts legal action against you and upon completion eliminates your debt, but it does not come without long-term costs. Ask an LIT if bankruptcy is the right option for you.
If you’re being sued by creditors for your unpaid debt, don’t panic. Whether you work with a lawyer or an LIT, there are plenty of approaches to take to ensure that you aren’t completely buried by your debt.