How to stop dealing with debt collectors

Dealing with debt collectors can be a pretty unpleasant experience. Although there are regulations in place, debt collectors have been known to call at inappropriate times, threaten to sue you and sometimes even harass other members of your family to try and get you to repay your debt. If you’re struggling financially, dealing with debt collectors can add to your debt stress. One of the ways you can get them off your back is by filing a consumer proposal. Here are some things to keep in mind:

Not all debt collectors work for your creditor. Creditors often sell outstanding debts to a collection agency, typically after a year or two. This can actually work to your benefit; while a creditor will be seeking full repayment of your debt, a collection agency will usually settle for a partial repayment.

Collections agencies probably won’t sue you. Although the threat of legal action can be intimidating, it’s estimated that collections agencies sue consumers in roughly one out of 10,000 cases. A creditor could be more likely to take legal action, however, if they haven’t sold your debt to an agency.

The government doesn’t give up. For outstanding tax debt or federal student loans, the government isn’t likely to negotiate or accept partial payments unless you file a consumer proposal. However, there arerepayment assistance programs when it comes to student loans.

You can actually get debt collectors to stop calling (in certain provinces). In B.C., Alberta, Ontario, Quebec, P.E.I. and Nova Scotia, you can get debt collectors to stop calling if you have “properly disputed” the debt owed in writing.

Pros and cons of a consumer proposal

If you file a consumer proposal with a licensed Trustee in Bankruptcy, you can stop dealing with debt collectors. This legally binding agreement will stop all harassing phone calls and threats of legal action. Here are some of the pros and cons of a consumer proposal:

PROS:

• A Trustee will negotiate with all your creditors so you only have to repay a portion of your debt

• You do not have to surrender any assets to your creditors

• Interest charges stop as soon as the proposal has been filed

• You will make one monthly payment on your debt; there are no additional fees required

CONS:

• A consumer proposal doesn’t eliminate all your debts overnight; it can take up to five years to become debt-free

• Certain kinds of debt (mortgages, student loans, car payments) cannot be included in a consumer proposal

• A consumer proposal will appear on your credit rating for three years after you’ve repaid your debts—it can affect your credit for up to eight years from the date you’ve filed

• A consumer proposal cannot be filed for debts greater than $250,000

While a consumer proposal does have its pros and cons, it is generally considered to be a better alternative to bankruptcy. Most importantly, a consumer proposal allows you to stop dealing with debt collectors and gets you started on the path to becoming debt-free. For more information on consumer proposals, it’s best to speak with a licensed Trustee in Bankruptcy.

How do you deal with debt collectors? Join the conversation on Twitter using the hashtags #BDOdebthelp #LetsTalkDebt