Debt collectors: what to do when they contact you

Posted on 6 July 2022

Written by Samantha Galea

We know how disruptive and frustrating calls from collection agencies and debt collectors can be. If you have had debt in collections for a long time, the chances are debt collectors are calling often. You might even be receiving calls at work. The worst part is that some debt collectors will threaten and attempt to scare you into finding money you don’t have to pay them off. It is one thing to settle a debt in collections because you can manage to do so – it is something else entirely if you borrow money to do it and end up in a worse situation than you were before. Fear is a strong motivator and if you have never been in debt before you might not know how the collections process works. You likely will not know all of your options and the word ‘bankruptcy‘ may intimidate you. You might worry about your assets – can a debt collector take away your assets including your home and car for non-payment, for instance? If they can leave you scared enough to find money at any cost to stop their calls, they have done their job. Remember, collection agencies are paid when they collect, so they are motivated to get you to pay up fast. In this article, we explore what to do when debt collectors contact you.

Do not let debt collectors scare you

If you have debt in collections, it is important to stay focused on a debt relief solution and remember it is just business. Debt collectors have a job to do – it is nothing personal. When it comes to what to say to collection agencies, your best tactic is to be polite and firm. What can a collection agent do or not do? And when will debt collectors give up? You might not know your rights and the rules collection agents must adhere to. If the conversation is going nowhere, politely announce that you will end the call now and hang up. As soon as you have decided what to do about your debt problem, you can share this information with collection agents when they call again. The irony is that debt collectors may be the ones who are scared if you decide to file a bankruptcy or consumer proposal. Be prepared for a debt collector to try and talk you out of filing. Some agents will tell you that you will or ‘destroy your credit score‘. The truth is that debt restructuring will require you to rebuild your credit score, but it is certainly not ruined forever. In fact, you will be back on your feet much sooner than you think. Firstly, you will pay off debt much faster than you would by making regular minimum payments. Secondly, once you have eliminated your interest payments and start paying down the balance, you will begin your rebuilding process. You will be back up where you need to be before you know it.

Consider a debt collector’s settlement offer carefully

If you owe a debt that is old, your debt collector may offer to settle your debt for a smaller amount. They may choose to accept a percentage of what you owe in order to close the file sooner. If you have received a debt settlement offer, you may be unsure of what to do. Before you decide to accept a debt collector’s settlement offer, there are a couple of things you should know that will help you to avoid any problems further down the line:

  • Approach the offer with confidence. Work with the debt collector to help them achieve their goals, but also ensure you are not missing anything. Make sure you fully understand exactly what they are offering. You should also try to negotiate before you accept. If, for instance, they would like the debt in one lump sum but you can only pay in three instalments, you can always ask. If your debt collector is keen for you to accept their offer quickly, they may be as flexible as they possibly can.
  • Get all offers in writing. Before you proceed with any debt settlement, ensure you capture the offer in writing before you send any funds. Without a formalized payment schedule with conditions, you may as well not have a debt settlement offer as it will mean nothing. Without the appropriate documentation, you may find yourself working with another debt collector and be back at square one.

Look at alternative options to a debt settlement

Although a debt collector’s settlement offer can keep them off your back for a little while if accepted, it might not be the best option for you. In fact, it could turn out to be more expensive than a consumer proposal or bankruptcy. Paying off debt quickly might mean taking on higher interest or risks somewhere else, like high interest debt consolidation loans or promises to friends and family. On the other hand, a consumer proposal takes a longer approach, stretching payments out over five years and a bankruptcy can free you from debt in as little as nine months. Although potentially longer term options, both debt relief solutions cost a lot less. Bankruptcy costs can be as little as $1,800, and a consumer proposal is a personalized solution that can reduce your debt by up to 80%. A debt collector’s settlement is liable to change, as offers can be rescinded which can lead to collection calls once again. There is no legal agreement for a debt collector to honour the debt settlement if they feel that you have missed a payment or are not sticking to the plan. A consumer proposal or bankruptcy is a legal option that all parties must stick to, and it will guarantee that creditors and debt collectors follow the rules. Debt settlements will likely mean you need to source the repayment funds from elsewhere as you do not have the money to make your repayments in the first place. This can lead to further financial difficulty. By comparison, a consumer proposal or bankruptcy solves your debt problem without the need to take on more loans.

Get protection from legal action

A debt collector may decide to pursue legal action against you to service your debt. In this scenario, you will need protection. Even a creditor themselves can stop using a debt collector, and instead go to the small claims court to request a judgement against you. If granted, they can go after your pay cheques and assets, including your property. A wage garnishment is often the last thing you will want when you are already struggling to repay your debts and get by. If you have received a notice of collection or verbal warnings, you should have some time to plan a pathway to financial freedom. This could help you to avoid any embarrassing scenarios with your employer. If, however, your debt collector reports to your creditor that they have not succeeded in securing a debt settlement or a payment arrangement, they could take you to court to have a wage garnishment order granted. Thankfully, it is possible to stop a wage garnishment. You will need a Licensed Insolvency Trustee to do so. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. At Spergel, we have over thirty years’ experience of protecting Canadians in debt from legal action. We help them gain a stay of proceedings through debt relief options including a consumer proposal and a bankruptcy, to offer immediate protection from creditors and debt collectors.

Keep debt collectors at bay

As well as dramatically reducing your overall debt and having a number of other advantages, a consumer proposal will stop your collection calls immediately. Your Licensed Insolvency Trustee will guide you through the entire process of filing. At Spergel, unlike other bankruptcy firms, you will be assigned your own trustee to walk you through each step of the journey to financial freedom instead of passing you from person to person. As soon as you file, a stay of proceedings will be triggered and your collection calls will stop immediately. Your Licensed Insolvency Trustee will then communicate with debt collectors and creditors on your behalf, working to negotiate and handle any collection calls. This can be a huge weight off your shoulders, and will enable you to begin a fresh financial start. If you are struggling to repay your debts alone, it will be extremely difficult to get creditors off your back and to stop contact and threats of legal action. Our trustees will then work with you to help you to rebuild your credit score and get you on the journey to a fresh financial future. We empower you to take the next steps after filing a form of debt relief, and will help to prepare you to sustain a life of manageable credit use.

If you need further advice on handling debt collectors and want to know what to do when they contact you, book a free consultation with Spergel. We can advise you on the best option for your financial circumstances, and will protect you legally from debt. We have helped over 100,000 Canadians to tackle their debt collectors and begin a fresh financial future, and we are here to help you too. Reach out today – you owe it to yourself.


Samantha Galea

Samantha Galea is a Chartered Insolvency and Restructuring Professional and LIT (Licensed Insolvency Trustee) who started working with Spergel as a summer student in 2010. With her socio-political background, Samantha is committed to breaking the stigma associated with bankruptcy so that individuals and families can properly understand all of their options on their path to debt freedom. She is also our resident expert on student debt and collection agencies, as well as the manager of our Brampton office. Outside of work, Samantha is an avid reader of historical non-fiction and world traveler.

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