Dealing with Debt Collectors: Strategies to Protect Your Well-being

^{By Bromwich+Smith Staff | 2549 words | Reading Time: 12 minutes | Last update: 2023/07/14}

When something feels overwhelming it can be like the weight of the world is on you. In fact, you may even display physical signs of that burden – headaches, tight jaw, inability to sleep, becoming irritable and maybe even feeling unwell.  For many issues, we can, and do turn to our friends, family or professionals.  When it comes to financial strain or feeling overwhelmed by debt, that seems to be a different story.  For some reason, society has decided that talking about our finances or debt is still taboo.

Feeling overwhelmed by debt is tough enough on its own, compound that with debt collectors calling you, sending demand letters or worse sending a debt collection agency after you and this can really put someone over the edge. How do you deal with debt collectors when you’re not in a position to pay? 

The Challenges of Dealing with Debt Collectors

Dealing with overwhelming debt, including stressful collection calls and the overall stress of being in debt can have consequential impacts on both physical and mental health.

Anxiety and Depression: The constant pressure from debt collectors can lead to increased levels of anxiety and depression. The fear of being contacted or the anticipation of confrontations can cause persistent worry, difficulty sleeping and feelings of pressure, unworthiness and guilt.

Increased Stress Levels: Dealing with debt collectors can result in chronic stress. This can in turn lead to physical symptoms such as headaches, muscle tension, gastrointestinal problems, and a weakened immune system.

High Blood Pressure and Cardiovascular Issues: Prolonged periods of stress can raise blood pressure levels- and stress brought on by debt can have the same affect. Elevated blood pressure, can increase the risk of heart disease and stroke.

Impaired Concentration and Decision-Making: The burden of dealing with debt collectors can impair concentration and decision-making abilities. It becomes difficult to focus on daily tasks or make sound financial decisions, with many reporting being in a brain fog.  

Social Withdrawal and Relationship Strain: Debt-related stress can lead to social withdrawal as individuals may feel ashamed or embarrassed about their financial situation. This can hinder relationships with family, friends, and colleagues, which will further lead to feelings of isolation and loneliness.

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Understanding Debt Collector Rights

Debt collection rights can vary depending on the type of debt involved.  

Secured Credit Contracts.

A secured credit contract involves borrowing money or obtaining credit with collateral provided by the borrower. In this case, if you default on payment, your creditor has the ability to repossess typically after providing notice and an opportunity to cure the default.  After repossessing the collateral, the lender may sell it to recover the outstanding debt. If the sale of the collateral generates more funds than required to repay the debt, the debtor may be entitled to receive any surplus. Conversely, if the sale doesn't fully cover the debt, the lender may pursue the individual for the remaining balance.

Conditional Sales Contracts

A conditional sales contract is a type of credit agreement where the buyer takes possession of the goods but doesn't become the owner until the debt is fully paid. If the buyer defaults on payments, the seller (creditor) generally has the right to repossess the goods. Proper notice and an opportunity to cure the default may be required.

Unsecured Credit Contracts 

Unsecured credit contracts involve borrowing money or obtaining credit without any specific collateral or asset tied to the debt. Collection actions: In the case of default, the creditor may take various collection actions, such as contacting the individual by phone, sending collection letters, or using third-party collection agencies. If the debt remains unpaid, the creditor may choose to file a lawsuit against the debtor to obtain a judgment for the owed amount, or explore Wage garnishment.  

How Long Can Collection Agencies Collect Debts in Canada?

In Canada, the statute of limitations for debt collection depends on the province or territory where the debt was incurred. Generally, the statutes range from 2 to 6 years. However, it's important to note that the statute of limitations pertains to the legal action that can be taken to enforce the debt through the court system, and it does not necessarily mean that the debt is automatically forgiven or no longer owed after the statute of limitations expires. This is where seeking an LIT can help you understand the regulations where you reside, and what will happen to those debts after the statue of limitations has expired.  

Typically, once the statute of limitations has passed, creditors cannot sue you in court to collect the debt. However, they may still attempt to collect the debt through other means, such as contacting you directly or reporting it to credit reporting agencies.

There is a common misconception about debts "falling off" credit reports, it's essential to understand that credit reporting agencies in Canada are regulated by the Personal Information Protection and Electronic Documents Act (PIPEDA) and provincial privacy laws. Generally, negative information, including delinquent debts, can be reported on your credit report for up to 6 to 7 years from the date of last activity or the date of default, depending on the province.


Even if the statute of limitations has expired and the debt is no longer enforceable in court, it may still be visible on your credit report until the reporting period has elapsed. This means that even if you're no longer legally obligated to pay the debt, it may still have an impact on your credit score and your ability to obtain credit in the future.

The Impact of Debt Collection Actions on Credit Scores

When a debt is sent to collections, it is considered a negative event and can lower your credit score.

The length of time a collection will appear on credit reports in Canada typically follows  up to 6 to 7 years from the date of last activity or the date of default, depending on the province. During this time, the presence of the collection account on your credit report can make it more challenging to obtain credit or loans.


Even if you have been delinquent in paying your bills, you have the ability to improve your credit score and minimize the impact of collections, it's important to establish a positive payment history by consistently paying your bills on time, managing your credit responsibly, and addressing any outstanding debts. Over time, positive financial behavior can help mitigate the negative effects of past collections on your credit score. 

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Strategies for Dealing with Creditors 

1- Doing Nothing 

In this option, you choose to take no immediate action to address your financial situation and debts. However, there are risks and consequences associated with this approach.  

• Accumulation of interest and penalties: By not taking any action, your debts may continue to accrue interest and penalties over time, leading to an increase in the total amount you owe.  

• Harassment from creditors: If you're unable to make payments on your debts, creditors may start contacting you more frequently and aggressively to collect the money owed.  

• Legal actions: In some cases, creditors may initiate legal proceedings to recover their money. This can result in a lawsuit, wage garnishment, or even the seizure of assets. 

• Credit score and future borrowing: Failing to address your debts can negatively impact your credit score. A poor credit score can make it difficult to obtain future loans or credit on favorable terms. 

• Emotional and mental strain: Carrying the burden of debt without taking any action can lead to emotional and mental strain. It's important to prioritize your well-being and seek appropriate solutions 

2- Direct Communication with Creditors  

Directly communicating with your creditors can be a proactive step towards managing your debts. We believe that being open and honest with your creditors is a great first step when you find yourself struggling with debt. 

• Before contacting your creditors, gather all relevant financial information, such as your income, expenses, and details of your debts. Be honest and open about your financial situation when speaking with your creditors. Explain any circumstances that have led to your current difficulties and provide realistic timelines for repayment. Based on your financial situation, propose revised payment terms that are more manageable for you. You will need to stick to these payments, so it is important to be honest with what you can afford to pay and when.  

3- Negotiating payment options: 

• When communicating with creditors, negotiating payment options can help you find a mutually acceptable arrangement.  If you have access to a lump sum of money, you can propose a reduced settlement amount in exchange for clearing the debt in full. If a lump sum payment is not feasible, propose a structured payment plan that fits within your budget. In some cases, creditors may be willing to lower the interest rate on your debts temporarily or permanently, reducing the overall amount you need to repay. 

4- Debt Counselling, Debt Management Programs  

Debt counseling and debt management programs can provide guidance and assistance in managing your debts. You can start with a few simple steps: 

• Look for reputable debt counseling agencies or non-profit organizations that offer debt management programs. Verify their credentials and ensure they are accredited by relevant regulatory bodies.  

• Learn about the services provided by these organizations, and understand the options available. They can offer financial education, budgeting advice, negotiation assistance with creditors, and help in setting up a debt management plan. 

Evaluating Better Business Bureau ratings and reviews: 

When researching debt counseling or management programs, it's essential to evaluate the credibility and reputation of the organizations. The Better Business Bureau (BBB) can provide valuable insights. Here's what you should do: 

• Check BBB ratings: Visit the BBB website and search for the organizations you're considering. Look for their ratings and any complaints or reviews filed against them. 

• Read customer reviews and complaints: Pay attention to the experiences shared by previous clients. Look for patterns in complaints and assess the overall satisfaction level of those who have used their services. 

• Consider other sources: Apart from the BBB, you can also explore other trusted sources, such as consumer protection agencies, to gather additional information about the organizations you're researching. 

• Look at online reviews, and testimonials from actual clients. 

Consumer Proposal  

A consumer proposal is a formal legal process available in Canada for individuals who are unable to meet their debt obligations. Here are some key points to understand: 

A consumer proposal is a proposal made to your creditors, usually with the help of a Licensed Insolvency Trustee (LIT), outlining a plan to repay a portion of your debts over an extended period or reduce the total amount owed.  

Involvement of Licensed Insolvency Trustee: 

To file a consumer proposal, you will need the assistance of a Licensed Insolvency Trustee(LIT). The LIT will help you navigate the process and ensure compliance with legal requirements. Here's what the involvement of an LIT entails: 

• Initial consultation: Meet with an LIT to discuss your financial situation and explore whether a consumer proposal is a suitable option for you. The LIT will assess your eligibility and provide guidance. 

• Developing the proposal: If a consumer proposal is deemed appropriate, the LIT will work with you to develop a proposal that outlines the terms of repayment and the reduced amount of debt. 

• Distribution and administration: Once the proposal is accepted by the majority of your creditors, the LIT will distribute the payments you make as per the agreed-upon terms and administer the proposal until completion. 

• Credit rating impact: It's important to note that filing a consumer proposal will have an impact on your credit rating. The proposal will be noted on your credit report for a specified period, typically three years after completing the proposal. 

Bankruptcy 

• Bankruptcy is a legal process that provides individuals with overwhelming debt a fresh start by eliminating most of their debts. Bankruptcy is a legal declaration that you are unable to meet your debt obligations. For many Canadians, the word bankruptcy evokes some strong emotions.  It feels like the end of the road, but it really is not.  It’s like the reset button.  It is for the honest, but unfortunate debtor – a means to have overwhelming debt forgiven.  It is an opportunity to start over and rebuild.  Bankruptcies, like consumer proposals, are only available through a Licensed Insolvency Trustee and offer the same protection with a stay of proceedings.  Creditors are legally bound and all contact must go through a Licensed Insolvency Trustee.  All unsecured debts, including tax debt owed to Canada Revenue Agency can be included in a bankruptcy and some assets cannot be liquidated.

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Practical Steps to Overcome Debt 

Inventory of Debt 

Create a comprehensive list of creditors and debts. The first step in overcoming debt is understanding who you owe money to and how much you owe. This includes credit card balances, loans, mortgages, medical bills, and any other outstanding debts you may have.  

Noting interest rates and payment dates: Along with the list of creditors and debts, it's essential to note the account details, including account number, interest rates and payment dates associated with each debt. This will help you prioritize your debts and understand which ones are costing you the most in interest. Additionally, noting payment dates will ensure that you stay on top of your billing cycles and avoid late fees or penalties. 

Budgeting 

To effectively manage your debt, you need to evaluate your income and expenses. Determine your total monthly income from all sources and compare it to your monthly expenses. Take a close look at your spending habits and identify areas where you can cut back or eliminate non-essential expenses. Explore the wants vs needs, and the expenses that can be cut vs those that can not. This will help you create a realistic budget and understand what additional money you can put towards debt repayment.  

Utilizing a budget planner tool 

To make budgeting easier, consider utilizing a budget planner  tool.  These tools can help you stay organized and provide a clear picture of your financial situation. 

Proactive Communication with Creditors 

It's crucial to engage and communicate openly and honestly with your creditors. If you're struggling to make payments or foresee financial difficulties, reach out to your creditors as soon as possible. Early intervention demonstrates your willingness to address the issue and may open up opportunities for negotiation or alternative payment arrangements. 

Seeking Professional Help 

If your debt situation becomes overwhelming or you're unable to negotiate a repayment plan with your creditors, it may be beneficial to seek professional help. Licensed Insolvency Trustees (LITs) are professionals who specialize in debt and insolvency matters. They can provide expert advice, help you explore debt relief options, and guide you through formal processes such as bankruptcy or consumer proposals. 

Benefits of consulting debt relief specialists 

Debt relief specialists, such as Bromwich+Smith, can offer valuable assistance in overcoming debt. Our expert team has the experience to assess your financial situation, provide personalized guidance, and recommend appropriate strategies for debt resolution. Let our team negotiate with creditors on your behalf, and help you develop a realistic repayment plan, and provide ongoing support throughout the process. 

It is important to understand the rights of your creditors when it comes to managing your debt as well as your own rights. Speaking to a trusted LIT will help you understand your options, and how to best manage your debt.  

Know that debt is not something to be ashamed of. Thousands of Canadians every year look to Licensed Insolvency Trustees like those at Bromwich+Smith to learn about available debt relief programs. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1.855.884.9243, or request a call back at contact us page.     

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By Taz Rajan Community Engagement Partner at Bromwich+Smith
Taz has been in the finance industry for nearly 2 decades and has always been passionate about education and empowerment.  Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring.  Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationship.