Understanding Creditor and Debtor Rights
Sept. 30, 2022
According to the Office of the Superintendent of Bankruptcy (OSB), personal insolvencies in Canada fell almost 30 percent during the height of the pandemic in 2020, from 137,178 filings to 96,458. In Ontario, filings fell by 10,860, or 24.2 percent. In both Canada as a whole and in the Province of Ontario, the highest percentage of filings by age group were by those 35 to 39 years old.
Bankruptcy, of course, carries with it a horrible connotation, as in, “I’m going to lose everything.” While filing for insolvency often involves the court-ordered sale of some personal possessions and assets, provincial law also offers exemptions that allow the filer to retain certain essentials. In addition, Canadian law allows for the just-below-bankruptcy option of filing a Consumer Proposal.
A Consumer Proposal represents a reorganization of the unsecured debts owed to your creditors, generally lowering the total owed, and affording you up to 60 months to pay off the reorganized debt load.
If debt is overwhelming you, and creditors are contacting you daily by every means possible – phone, text, email, perhaps even in person – bankruptcy can stop the constant bombardment, as can a Consumer Proposal, so long as you adhere to the reorganization agreement for the latter.
For legal advice and help in or around Toronto, Ontario, in determining whether filing for insolvency or for reorganization is right for you, contact Matthew R Harris Law P.C.
Lawyer Matthew Harris and his team have helped countless individuals and businesses evaluate their options for getting out of debt, and they stand ready to help you decide on the best course of action – and then assist you in navigating the system to re-establish your financial freedom.
Matthew R Harris Law P.C. also proudly serves clients in Hamilton, London, and Ottawa.
The Rights of Creditors Under the Law
When you fall behind in your payments to a creditor, the creditor may launch an in-house operation to collect the debt, or it may sell the account to a debt-buying firm, which will conduct its own debt collection effort. Regardless of which type of debt collector is after you for what you owe, they are largely unregulated on the provincial level.
Banks and credit card companies, however, are regulated by the federal government, so you can file complaints of collection abuse with federal regulators when the debt originates with those institutions, even if the debt has been sold to a debt buyer.
Collection agencies fall into another category. Either the original creditor or the debt buyer may contract with a collection agency to contact you over the amount owed. Collection agencies are licensed by the province or territory in which they operate, and they are subject to a code of conduct established by that province or territory.
In short, whether you can file complaints over how you’re being treated over your debts depends largely on who is contacting you.
The Rights of Debtors
Your debts are subject to a statute of limitations, meaning that after a certain period of time, collectors can no longer contact you for payment. The statute for unsecured debts for most Canadians is two years, though some provinces have longer limits. Personally enduring collection efforts for two years, however, can be a daunting and emotionally-draining task.
Your rights under Canadian law to reorganize or discharge your debt are governed by both federal and provincial statute. Insolvency, or what is commonly known as bankruptcy, is defined and governed on the federal level by the Bankruptcy & Insolvency Act (BIA).
In Ontario, a statute known as the Execution Act governs the exemptions consumers can claim when filing for bankruptcy (other provinces have similiar statutes with different names). The act sets dollar value limits on assets you can exclude from collection and sale by the Bankruptcy Trustee. These assets include your residence, vehicle, tools of the trade, clothing, furnishings and appliances, and farming instruments, but they are protected only up to the established dollar limit.
The BIA also governs Consumer Proposals. The Office of the Superintendent of Bankruptcy (OSB) on its website describes a Consumer Proposal as “an offer to pay creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both.” With a proposal, you can keep all your possessions so long as you honor the commitment agreed to.
Whether you choose insolvency or a reorganization will depend to a great extent on the level of your debts and the level of your income.
Legal Guidance You Can Trust
If debt worries are overwhelming you and you want the collection efforts to stop, you can seek relief through insolvency or a Consumer Proposal. If your wages are sufficient enough for a reorganization, then you can pretty much protect everything you’ve bought or acquired through the years. Indeed, tentative statistics from 2021 show that the vast majority of filers opt for the Consumer Proposal option.
Matthew R Harris Law P.C. will meet with you, discuss your financial situation, advise you of your best option going forward, and then help you take the legal steps necessary to ultimately become debt-free and ready to start life afresh.