Bill Collectors and the Collection Agencies Act - How to Stop Collection Calls

If you default on payments to creditors the first people you are likely to hear from are bill collectors. Bill collectors are collection agents who work for collection agencies. Having a debt in collections can be stressful and may leave you wanting to figure out how to stop the collection calls from bill collectors.

In Ontario, collection services agencies and bill collectors are regulated by the Ministry of Consumer and Business Services are have to follow laws outlined in the Collection Agencies Act. You can view the Collection Agencies Act on the E-Laws website.

The Collection Agencies act was put in place to establish guidelines to put a stop to improper collection action on the part of Collection Agencies. In the past collection agencies would cross the line, harassing people who owed their client’s money, beyond ordinary collection calls to the debtor. This led the government to take action and establish limits for bill collectors.

The first step a collection agency must take when a debt is assigned to them for collection is to send you a written notice through the mail (email doesn’t count). This notice must include:

1.       The name of the creditor (the person or business that says you owe them money)

2.       The amount the creditor says you owe

3.       The name of the collection agency and its authority to demand payment on behalf of the creditor.

There are limits to how, when and how often bill collectors are allowed to contact you. Bill collectors are not allowed to contact you by telephone more than three times in a seven day period without your express permission. This includes speaking with you or leaving you a voicemail.

The Collection Agencies Act also outlines that a collection agency or its bill collectors cannot:

1.       Call you on Sunday, except between the hours of 1 p.m. and 5 p.m.

2.       Call you on any other day of the week between the hours of 9 p.m. and 7 a.m.

3.       Call you on a statutory holiday

4.       Use threatening, profane, intimidating or coercive language, or

5.       Use undue, excessive or unreasonable pressure.

A bill collector representing a collection agency can contact your employer once to obtain your employment information. Otherwise, they cannot contact your employer unless:

1.       Your employer has guaranteed the debt

2.       The call is in connection with a court order or notice of garnishment that has been issued by the creditor they are representing

3.       You have provided written authorization to contact your employer

Under the Collection Agencies Act a bill collector representing a collection agency cannot contact your spouse, a member of your family or household, or a relative, neighbour or acquaintance or any other third party, except to obtain your address and telephone number, unless the person contacted cosigned or guaranteed the debt or you have provided permission for the person to be contacted.

Finally, under the Collection Agencies Act a bill collector representing a collection agency cannot:

1.       Give false or misleading information to any person

2.       Recommend to a creditor that a legal action be commenced against you without first sending you notice.

If you want to stop collection calls there are two ways to do it.

Write to the collection agency and advise them that you only want to receive future communications from them in writing.

If you cannot pay the debt owed to the creditor that the collection agency is representing you can also participate in a Federal Government Program which will not only provide immediate debt relief but will also stop collection calls.

If a bill collector representing collection agency is harassing you or is exhibiting behaviour in contravention of the Collection Agencies Act you can make a complaint against through the Ministry of Consumer and Business Services.

For more information about bill collectors, the Collection Agencies Act and how to stop collection calls please visit www.debtcare.ca or contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582.

What is a Good Budget and What is a Debt Service Ratio?

The first step to building a positive financial future is to have a budget and to understand your debt service ratios. What is a debt service ratio? There are actually two kinds of debt service ratio. A debt service ratio is a measurement used by the bank to determine if your bills represent an acceptable proportion of your income.

The two primary debt service ratios are your gross debt service ratio (GDS) and your total debt service ratio (TDS).

Your gross debt service ratio represents your monthly house payment divided into your gross monthly income, expressed as a percentage. The maximum acceptable gross debt service ratio is 30%. With that said, 30% is the limit so if your GDS is 30% that is not really positive. A healthy budget should include a GDS that’s approx. 25%. If your GDS is more that 30% this is an indicator that your housing payments are too high.

Your total debt service ratio represents your monthly housing payment plus your monthly payments to all loans and credit cards, divided into your gross monthly income and expressed as a percentage. The maximum total debt service ratio is 40%. With that said, 40% is the limit so if your TDS is 40% that is not really positive. A healthy budget should include a TDS that’s approx. 30%. If your TDS is more than 40% it is an indicator that either your housing payments or your payments of other debt are too high.

GDS and TDS are two components of a budget. What is a good budget? A good budget involves reasonable housing payments and reasonable payments of debt and expenses with surplus income left over to contribute to savings. A good budget should factor in all of your expenses. One key to positive money management is awareness. There are three primary budget related factors that contribute to families that live paycheque to paycheque. The first is unrealistic housing payments, the second is over spending and the third is too much debt.

When looking at your budget, consider what you spend on things like entertainment, food (especially take out and dining out) and shopping. These are the three most common places that wasteful spending occurs. Avoid credit cards and use cash as opposed to your debt card an effective way to be more aware of what you spend and to avoid incurring more debt. Set yourself a daily cash allowance that includes a weekly personal reward so following your budget is not all work with no play.

Where debt is concerned, take a good hard look at how much you owe and how you are paying your creditors. If you are only able to make minimum payments or are finding it difficult to even make minimum monthly payments, this is a sign that you may be over-extended. Sitting down with a debt consultant is one good way to realistically review the debt that you owe and your budget to come up with a financial strategy to deal with debt and improve your financial situation. If you still have questions as to what it a good budget or about debt-servicing, debt consultants can generally answer those questions for you too.

For more information about building a good budget and gaining a better understanding of your debt service ratios please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca.

Wage Garnishments in Canada - How to Stop a Garnishment on Your Wages

Thousands of Canadians have their wages garnished each year. In the past few years there have been more instances of individuals having their wages garnished because of the turbulent economy. Wage garnishments in Canada occur when one party believes that another party owes him or her money and pursues enforcement action.

Wage garnishments in Canada are generally issued in one of three ways.

The first most common reason a wage garnishment is issued is when a debt is owed to the government and the individual is unable to make a satisfactory, voluntary repayment arrangement. Some examples of this are: tax debt owed to The Canada Revenue Agency or The Minister of Finance or a debt owed to the Province and/or Federal Government for an unpaid student loan. If the government wants to place a garnishment on your wages, they don’t have to obtain a court order to do so. If you want to know how to stop a garnishment on your wages, the answer is pretty much black and white. You either have to make an acceptable voluntary repayment plan with the government so that they agree to lift the garnishment on your wages or participate in a Federal Government program to seek debt relief. Wage garnishments that are issued by the government can be applied at up to 100% of your wages.

The second most common reason that a wage garnishment is issued is when one party sues another party in the Superior Court of Justice and is awarded judgement. Once awarded judgement he or she can apply to garnish the individual’s wages. A common occurrence is when an individual defaults on a debt to a creditor and then the creditor sues him or her in the Small Claims Court. When a wage garnishment is issued through the Small Claims Court in Ontario your wages can be garnished up to 20% of your net earnings. If you want to know how to stop a wage garnishment issued by the Superior Court you have three choices. Make a voluntary payment plan arrangement with the party who sued you where they agree to lift the wage garnishment, to make a motion to the Court offering a voluntary payment plan and asking that the wage garnishment be set aside, or by applying to a Federal Government program for debt relief.   

The third most common reason wage garnishments are issued is as a result of child support arrears. If you want to know how to stop a wage garnishment for child support arrears you have only one choice and that is to apply to the Court to have it removed. This can be very challenging to accomplish. A Federal Government program will not stop a wage garnishment for unpaid child support.

The fastest most effective way to stop a wage garnishment is through a Federal Government program. The benefit achieved by leveraging a Federal Government program to stop a wage garnishment is that the garnishment will be stopped, interest will be frozen, in many cases you can have the principal amount of the debt that you owe reduced and make a voluntary monthly payment.

Participating in a Federal Government program will require that you include all debt that you owe. If you have debt to other creditors like credit card providers, loan providers, unpaid cell phone bills etc., these debts will also be covered under the Federal Government program. This will mean that they too will have their interest frozen and in many cases the principal debt reduced. In the event that you had several debts you would make a single monthly payment under the Federal Government program.

If you are having a financial problem and your wages are being garnished it could lead to increased financial hardship. You don’t have to suffer and there are options available.

For more information about wage garnishments in Canada and how to stop a garnishment on your wages please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca.

What is a Trustee?

What is a trustee? A trustee is a person who holds property, authority, or a position of trust or responsibility for the benefit of another. In the case of an “estate trustee” the trustee could be a company or an individual. An estate trustee in the case of an individual who dies or is incapacitated, represents the deceased or the incapacitated individual.

There are other types of trustees though in specific matters that have different responsibilities and are appointed by the government to administer an estate according to legislation.

What is a trustee in bankruptcy? In Canada, a trustee in bankruptcy is an individual or a corporation licensed by the Superintendent of Bankruptcy to hold in trust and, subsequently, to distribute bankrupt’s property among the creditors in accordance with the Bankruptcy and Insolvency Act (BIA). The bankrupt and all other persons holding the bankrupt’s property must transfer the property to trustee until he or she can determined how the estate shall be administered. “Property” includes income and assets. The trustee may also assist individual in preparing and submitting a consumer proposal to creditors.

Where an “estate” trustee would act to carry out the intent of the deceased or in the best interest of the incapacitated individual, a “bankruptcy” trustee acts in the best interest of the bankrupts creditors and it is his or her obligation to recover as much money from the estate as possible for the benefit of the creditors.

In Canada, consumers and businesses often find themselves confused, pondering the question “what is a trustee?” and many get the impression that the trustee in bankruptcy represents their best interests. This is because so many trustees aggressively advertise to people who have financial problems. They do this because they aren’t profitable unless they have individuals and businesses approaching them to file for bankruptcy or to file consumer proposals. These advertisements often promote debt solutions, debt settlements and debt help. When you visit the trustee he or she will often only offer one of two choices: a bankruptcy or a consumer proposal. Inevitably the question is who does the “debt solution” benefit in the end?

In the case of a bankruptcy the trustee is paid a “tariff” a “fee” from the proceeds of the bankrupt estate. In the case of a consumer proposal the trustee receives remuneration based on a percentage of the amount of the consumer proposal that he or she negotiates.

When you visit the trustee he or she will require that you provide complete disclosure of your income and assets. If the trustee determines that a consumer proposal is the only legal remedy to your debt, he or she will then determine the amount of the consumer proposal based on your ability to make monthly payments over 4-5 years. For example, if you owe $20,000 and the trustee determines that you can afford to repay your creditors at 100 cents on the dollar, on a monthly basis over 5 years then the amount of the consumer proposal will be $20,000, 100% of the debt owed. If the bankruptcy trustee determined that you can only afford to repay $13,000 over 5 years then your consumer proposal would be 65% of the debt owed. The challenge is that the smaller the consumer proposal, the less remuneration to the trustee, which provides an incentive to the trustee to arrange larger proposals. In addition and as we mentioned earlier the trustee is required by law to secure the greatest amount of repayment possible for the benefit of your creditors.

It is for this reason that approaching a trustee directly to discuss your debt can be a risky proposition. In the past 5 years, this has spawned new industry: debt consulting. Debt consultants are familiar with the BIA and are able to evaluate your estate to help you determine which option is right for you and they can even negotiate on your behalf with bankruptcy trustees.

This provides the insolvent person or debtor with a number of benefits.

1.       Because the debt consultant is hired by the debtor, he or she represents the debtor`s best interests, not the creditors.

2.       The debt consultant can interpret financial information and often negotiate a better deal than the consumer or business would have achieved had they visited the trustee directly.

3.       The debt consultant can request evaluations of assets like homes and vehicles to ensure that the trustee does not over-estimate an asset resulting in you paying more in a consumer proposal or bankruptcy.

4.       The debt consultant can work with you to come up with a financial plan to rebuild your credit and finances after a bankruptcy or a proposal.

 A bankruptcy or proposal offers many benefits and can provide a person who has a financial problem with immediate debt relief, including stopping collection action like a wage garnishment. Like anything else, researching a solution to a financial problem is truly “buyer beware” and if you are considering an avenue for debt relief like a bankruptcy or consumer proposal, we do not recommend that you do so unrepresented.

For more information about a trustee in bankruptcy or if you are struggling with a financial problem please visit www.debtcare.ca or contact Michael Goldenberg at DebtCare Canada by calling 416 907-2582 for more information.