Dealing with creditors.

Maybe you’ve heard the story about the Ostrich who faces danger. It buries its head in the sand thinking that if the danger is ignored, the danger will go away. That’s one foolish Ostrich. And it’s one foolish human being who thinks that credit problems will go away if they are simply ignored.

Don’t be an Ostrich. You can face your debt problems. You can deal with the creditors you owe money to. You can do so without fear, and in smart ways.

Find out how in this section of our site, which covers:

• How to handle collection calls
• How to reach a new debt payment agreement
• Knowing your legal rights
• Understanding your credit rating

How To Handle Collection Calls

Debt trouble and collection calls go hand in hand. If you’re getting calls, first make sure you are talking to a credit supervisor at the bank, finance company, or retail department store that wants your money. If a collection agency representing any of these creditors calls, tell the agency that you prefer to deal with your creditors on your own.  Then contact them directly to see if they'll consider negotiations.

As you go, always keep track of who you speak to and what is said. Also, know your consumer credit rights.  Stay calm. Be polite. Try to agree on a new debt payment schedule with smaller, longer-term payments you can afford. Never make promises you can’t keep. Also, make a point of asking these three things:

• Can the creditor reduce the total amount owing on the debt?
• Can the creditor forgive and end future interest on the debt?
• Can the creditor pull the account back from collections?

If you reach an agreement, put it in writing.

Put your debt payment agreement in writing

Put any and all verbal agreements with creditors in writing.

Your new debt payment agreement should be written as a formal letter. Use the sample letter we have created for you here. Or create your own letter covering the following points:

• Your debt collector contact on the agreement
• Your reasons for being behind on the debt
• Your intention to pay the debt under new terms
• Your employment and income status
• Your request (if agreed) for a reduction of the total amount owing
• Your request (if agreed) to be forgiven on paying future interest
• Your request (if agreed) to pull the account back from collections

With the above, include proof of your income (a photocopy of your pay slip) and a separate, itemized list showing all of your monthly expenses.

Know your rights under the law.

When talking to a debt collector, remember that you have legal rights.

The law in Canada says that debt collectors cannot harass you in any way. They are not allowed to bother your family, friends, or employer. Sometimes a bill collector may try to bully you. They know you are worried about money. You may not be thinking clearly. They may ask you to borrow money from someone else to pay back the debt you already owe. Do not fall into this trap. You do not have to answer a bunch of questions. Just talk about how you can pay the debt in a way that you can afford. Keep track of what is said.

If the bill collector harasses you, report the person to your local Ministry of Consumer and Business Office.

Understand your credit rating.

Get to know Canada’s credit rating system. A bad credit rating can spell big trouble. A good credit rating can make life much easier.

In Canada, there is a credit report on file for anyone who pays bills, has credit, or borrows money. Credit ratings are used in credit reports, which are basically a history of how people pay their bills and handle their credit. A credit report will tell others whether you are a good or a bad credit risk. Lenders, like banks and finance companies, rely on credit reports. So do many employers and landlords.

Get your free credit report from either one of two major credit reporting agencies in Canada - Equifax and TransUnion.