What Happens If I Cannot Keep Up With My Debt Payments?

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1 What Happens If I Cannot Keep Up With My Debt Payments? Owing money is called being in debt. It can be stressful if you are having trouble keeping up with your bill payments, or you are worried about being sued, or if you have been sued and you don t know what to do. The purpose of this fact sheet is to provide you with some general information and resources on debt issues. It is recommended that you should get legal or professional advice on your specific situation. See our Resources section at the end of this document for contact information for legal services and other organizations mentioned in this fact sheet. What Are Some Of The Things I Can Do To Deal With My Debt? There are formal and informal steps you can take to deal with your debts. Informal steps include contacting your creditors to try and work out a repayment plan. You can also contact your bank or financial institution about consolidating your debt. Formal steps include filing for bankruptcy under the Bankruptcy and Insolvency Act or filing a consumer proposal. In Nova Scotia, you can access the Debtor Assistance Program offered through Service Nova Scotia for advice on what steps you can take to deal with your debt. Informal Steps Contacting Your Creditors You can call your creditors and explain to them why you cannot make your payments. When you do that, you can suggest making lower payments over a longer period of time or asking the creditor to lower the interest rate. Last Updated: January 21, 2016 Page 1 of 10

2 What Can I Do When Collection Agencies Are Calling Me? The Collections Agencies Act and Consumer Creditors Conduct Act provide some restrictions on what collection agencies can and cannot do. Some things that collection agencies cannot do include: Harass you; Calling on Sundays or outside business hours of 8 am to 9 pm; Not making sure that you actually owe the debt; Making a collect call to debtors; Lying directly or indirectly to a member of your family; Contacting or threatening your employer, your spouse or any family member to give out information that could affect their employment or employment opportunities; Contacting a debtor who has indicated they are represented by a lawyer or phoning a debtor without first contacting them in writing, if they are a licensed collection agency. IMPORTANT If you have a lawyer who tells a Collection Agency that they are representing you, the collection agency has to deal directly with your lawyer. If you believe the collection agency may be breaching any of these restrictions, you can contact Service Nova Scotia at to file a complaint. Consolidating Your Debts This means combining your debts into one loan. You can talk to your bank or financial institution about consolidating your debts. This is sometimes called a consolidation loan. If your bank or financial institution approves a consolidation, the bank pays off the debt included in the consolidation. In return, you will make one monthly payment to your bank to pay off the single loan. The bank will charge interest on the loan, but it will be a much lower interest rate than the interest on credit card debt. Last Updated: January 21, 2016 Page 2 of 10

3 Formal Steps If you are considering more formal steps to deal with your debt you should consider contacting: Debtor Assistance Program Trustee in Bankruptcy Small Claims Court Debtors Assistance Program It is a program offered through Service Nova Scotia at various Access Nova Scotia offices. A Debt Assistance Officer will give you advice on the options available to you to manage your debt. They can help you rework a budget, negotiate repayment plans to creditors, or pay off debts with a consolidation loan. You can contact your local Access Nova Scotia Office for more information and to make an appointment. Consumer Proposal Through the Debtors Assistance Program you can make a consumer proposal. If you owe less than $250,000 not including your mortgage, you can make a proposal to your creditor to pay off a percentage of the debts owing, increasing the time to pay the debts owing or a combination of both. If you can get enough creditors to agree or deem to agree to the proposal, it becomes binding. There is a fee payable to Access Nova Scotia for consumer proposals. Bankruptcy Bankruptcy is often a last resort for debtors. It is a complicated area of law in which you should speak to a Bankruptcy Trustee to answer all of your questions. The Office of Superintendent Bankruptcy maintains a list of licensed Insolvency Trustees. For more information visit their website. Last Updated: January 21, 2016 Page 3 of 10

4 There are fees associated with filing bankruptcy and, therefore, it is important for you to discuss with the Trustee, whether all of your debt can be released by the bankruptcy because some debts may be excluded and what the costs for the bankruptcy proceedings will be. IMPORTANT - BANKRUPTCY ASSISTANCE PROGRAM The Bankruptcy Assistance Program is a program offered by the Office of the Superintendent of Bankruptcy to help debtors who want to declare bankruptcy, but do not have the money to obtain a trustee in bankruptcy. To be eligible for the Bankruptcy Assistance Program, you must: 1. Have contacted and been unable to retain the services of at least two Trustees. 2. Not be in jail. 3. Not being involved in commercial activities. 4. Not have surplus income. For more information on eligibility and how to participate in the Bankruptcy Assistance Program you can call toll free: What If I Have Been Sued By a Creditor? If you have been sued by a creditor, there are different things you may do. You may be sued in either the Supreme Court of Nova Scotia or in Small Claims Court. You may agree you owe the money, but need more time to pay the money back. You can file a Defence to avoid a default judgment and to give you time to come up with the money to pay the debt or negotiate a payment plan. IMPORTANT You have to be careful because while the debt is unpaid it continues to go up because of interest and legal costs. You can face an order for legal costs if you file a Defence that has no merit. It is important to get legal advice when you have been sued. For more information on where to get legal advice see our Resources section at the end of this document. You may want to defend the claim because you do not agree you owe the money the creditor says you owe. Some defences might include: You paid the money, but it was not credited to your account; You do not owe the debt; Last Updated: January 21, 2016 Page 4 of 10

5 You have not defaulted in your payments and you are current in your payments; The amount claimed by the creditor has been miscalculated; The creditor is collecting more than what was agreed to; You did not agree to pay (loan was not formalized properly into an agreement); Creditor missed the limitation period to sue you. You must have evidence of your claim to persuade the court to agree with you. You must have evidence to support your claim such as a copy of the loan agreement and documents that show proof of payment. If you believe you may have a defence, you should get legal advice. For more information on where to get legal advice see our Resources section at the end of this document. What If I Decide To Go To Small Claims Court Or I Have To Defend Myself In Small Claims Court? Small Claims Court has Adjudicators instead of Judges. Adjudicators are lawyers who have received training to act as adjudicators. Most of the people in Small Claims Court are not represented by a lawyer. Small Claims Court is like any court in that you can present evidence, call witnesses, cross examine the other side and their witnesses and provide the court with a summary of your evidence and the law that applies to your case. The rules of evidence are not as strictly enforced in Small Claims Court and generally the test is evidence that is relevant to the issue before the court would be considered. Your claim is limited to $25,000 (not including legal costs and interest) in Small Claims. How Is a Proceeding In Small Claims Court Started? You have to file a Notice of Claim. It must be filed in person. There is a cost to filing a claim in Small Claims and the cost changes depending on the claim filed. For more information visit the Courts of Nova Scotia website. You cannot file your claim online. However, you may qualify for a waiver of the filing fees if your income is sufficiently low. Once you have filed your claim in Small Claims Court, you then have to serve the other side with Notice of your claim. Once you have served the Last Updated: January 21, 2016 Page 5 of 10

6 other side, you have to file an Affidavit of Service that states that you did serve the person, when, where and what time. It must be sworn and filed with the court. The Small Claims Clerk can swear your Affidavit. Once you have served the other side with Notice of Claim or you have been served with a Notice of Claim, you have the opportunity to try and settle the matter on your own. If you reach an agreement, it should be put in writing. If you do not think you can settle, you should file a Defence or Counter Claim. This allows you to defend yourself against the claim made or to put forward your own claim against the other person. You have to file and serve the Notice/Defence of Counter Claim within 20 days of being served with a Notice of Claim. What If I Do Not Like The Decision Granted by the Adjudicator? If you disagree with the decision of the Adjudicator, you have 30 days to appeal that decision to the Supreme Court of Nova Scotia. However, appeals are limited to a jurisdictional error, error of law or failure to follow the requirements of natural justice (i.e.: right to a fair hearing). If you are considering appealing a decision to Supreme Court, you are encouraged to get legal advice. For more information on where to get legal advice please see our Resources section at the end of this document. Once a Small Claims Order is obtained, it can be enforced either by an Execution Order, a Certificate of Judgment or Recovery Order. Execution Orders An Execution Order is an Order that lets the Sheriff seize wages, money from bank accounts, or property that can be sold to satisfy the debt. In order to obtain an Execution Order, a creditor needs information about the debtor and fees have to be paid to the Sheriff that can also be recovered as part of the Execution Order. An Execution Order has to be registered at the Personal Property Registry and a creditor can register a judgment at the self-serve kiosk at any Land Registration Office or hire a service provider to register it for them. Last Updated: January 21, 2016 Page 6 of 10

7 Certificate of Judgments A Certificate of Judgment limits your ability to mortgage or sell property that you currently own. A creditor must register it with the Land Registration Office. If you do sell your property, you will have to satisfy the Court Order first which is what the creditor would call a lien on your real property. There is a fee to register the Certificate of Judgment and the lien on the property will expire after 5 years. Recovery Orders A Recovery Order allows the Sheriff to seize property that was ordered to be returned to a party. A creditor must provide the Sheriff with as much detail as possible about the property and there is also a fee payable to the Sheriff. What if The Creditor Gets a Judgment Order, Certificate Of Judgment or Recovery Order Against Me? If you get a Judgment against you, not all sources of income or assets can be taken or garnished by the creditor. Some sources of income that cannot be taken or garnished by private creditors: 1. Income Assistance. 2. CPP Payments. 3. Old Age Security and GIS. 4. Employment Insurance. 5. Child Tax Benefit. IMPORTANT If you owe money to Income Assistance, CPP, Old Age Security GIS, EI or Child Tax Benefit or any other government program, that money can be deducted from any benefits payable that you would receive under those programs. The following assets cannot be taken under an Execution Order: Clothing, household furnishings and furniture of the debtor and family; Family s fuel and food; All grain seeds and livestock reasonably necessary for domestic use by the debtor and family; Last Updated: January 21, 2016 Page 7 of 10

8 A car valued no more than $6500 if used for work and there is no public transit or up to $3000 if not used for work, unless the debt was for monies to purchase the car; All medical and health aids reasonably necessary for the debtor and family; and, Farm equipment, fishing nets, tools and others items used in the debtors chief occupation not exceeding $1000. What if I Am Working, How Much of My Income Can Be Garnished Under An Execution Order? If the Execution Order does not state the amount to be garnished from your income, only 15% of your gross wages can be garnished. Your income cannot be garnished at all if your net income is $330 or less a week as a single person or $450 or less a week if you support a dependent. What If My Bank Receives an Execution Order? If a bank receives an Execution Order from the Sheriff to seize the money in your account, they cannot pay the Sheriff any money in the account that comes from exempt sources such as CPP or Income Assistance. If you think that your bank may be contacted or provided with a copy of an Execution Order, you should contact the bank to tell them what money in your account is protected as an exempted source so they don t send it to the Sheriff. Sometimes the bank will not stop to consider what sources of income are in the account that might be exempt before sending it to the Sheriff. Other times a bank will freeze your account if there is a debt owing and you will have to negotiate with the bank as to what is or is not exempt sources in the account in order to release money in the account that is exempt. Where Can I Get Further Help, Information and Resources? Nova Scotia Legal Aid Legal Aid helps low-income people get legal assistance through a broad range of services. You can find your local Nova Scotia Legal Aid Office by looking under Lawyers in your phone book. You can also check the Nova Scotia Legal Aid website or phone: Last Updated: January 21, 2016 Page 8 of 10

9 Toll Free: Halifax: Dalhousie Legal Aid Service (DLAS) Website: DLAS Halifax: Legal Information Society of Nova Scotia You may be able to get free advice about your legal issue from a lawyer for up to 20 minutes. This service is provided over the phone. Call the Legal Information Society of Nova Scotia at , to find out if you qualify for this service. Website: LISNS Toll Free: (within Nova Scotia) Halifax: questions@legalinfo.org Dial-a-Law Website: Dial-a-Law How LISNS Can Help Not Toll Free: Courts of Nova Scotia You may be able to get free legal advice on a family or civil issue in a private 1 hour session for self-represented litigants for matters in the Supreme Court or the Court of Appeal. This does not include Bankruptcy Court where you are represented by a Trustee in Bankruptcy. Website: Courts of Nova Scotia Clinic and Supreme Court: Clinic and Court of Appeal: Office of the Superintendant of Bankruptcy Canada Website: Bankruptcy of Canada Last Updated: January 21, 2016 Page 9 of 10

10 Access Nova Scotia (Debtor Assistance Program) Website: Debtor Assistance Program Toll free: Halifax: TTY: Disclaimer: This site contains general legal information for residents of Nova Scotia, Canada. It is not intended to be used as legal advice for a specific legal problem. Last Updated: January 21, 2016 Page 10 of 10