Howard Hayes - Client Services

Most of the people we talk to here at Hoyes Michalos & Associates have had at least one of their debts put into collections.  It is never a pleasant experience.

If a lender’s efforts to recover a debt are not successful, they often hire a third party collection agency to try to recover their money.

It’s never normally the best advice to bury your head in the sand and ignore the collection calls.  It will likely only make things worse.  Even if you have little or no money and know that you’re not going to be able to meet the demands of the collection agents, ignoring them will only leave them guessing as to why you’re not making payments and they’ll continue to call.  

 Here are three options to stop collectors from calling:

1. Negotiate with them and work out a plan. Some collection agents are better than others.  Not all of them, but some collection agents are slowly realizing that it may benefit everyone to work out a reasonable plan with you rather than coercing you into unrealistic repayment plans.

2. You can file a Consumer Proposal with a licensed trustee, or

3. File for Personal Bankruptcy which, like a Consumer Proposal will legally protect you and force them to stop all collection actions against you.

Only a Consumer Proposal or Personal Bankruptcy provide the necessary legal protection required to stop collectors pursuing legal action against you such as attempting to garnishee your wages.

Collectors are usually work on a commission basis (the commission rates are often higher for the collectors  the quicker they can collect from you) so one incentive they have is to call as often as they do and make demands, because by collecting money from you they are increasing the size of their own pay cheques.

In Ontario, collectors are obligate to stick to very specific rules when it comes to collecting debts, however based on what many of our clients tell us,  it’s also apparent that not every collection agent sticks to these rules, but here are a few of your rights to be aware of if collectors are calling.

•You’re entitled to be notified in writing first, that your account has been assigned to them for collection.

•The collector must clearly identify themselves, who they work for, and amount owing when calling you.

•They cannot make calls that may be considered harassing to you and your family.

•They cannot give you false or misleading information

•They can only call other people to confirm your phone number and address.

•They must have written permission from the original creditor to take any legal action to collect a debt from you.

A full list of regulations can be found on the Ontario Government website.

The most important factors to remember if collection agents are calling you, no matter the size of your income and size of the debt, you have rights and most importantly, you have options such as filing a Consumer Proposal or Personal Bankruptcy.  

If a Consumer Proposal is something you’re unfamiliar with, it’s where a negotiated settlement is arranged to allow you to repay a portion of your debts over a period of time without having to declare bankruptcy.  The following article written for my Cambridge Office Blog lists some of the advantages of a Consumer Proposal to consider when considering a Proposal to creditors over a Personal Bankruptcy. 

At Hoyes Michalos & Associates Inc, we’re happy to provide you with the advice you need to deal with collection agents that call and to help you with ways to bring your debts under control.  We can discuss your options either on the phone or we can arrange to meet with you in our office for a no charge consultation.   Contact us by sending an email with any questions you may have, fill out our online evaluation form or call today at 310-PLAN and let’s get started.

If we first understand why a creditor issues a garnishee and how they go about it, then we can understand how to deal with a garnishee. A creditor (like a bank or credit card company) goes to court to get a garnishee because they have not been paid, they have been ignored, or you cannot arrange a satisfactory repayment arrangement with them. For banks, credit cards and the like, issuing a garnishee is a last step because they are required to go to court, get a judgment and have the garnishee issued. The Ontario Wages Act usually keeps the rate of the garnishment to twenty per cent.

The best way to stop a bank or collection agency from garnisheeing your income is to be proactive. That means talking to the creditor prior to them getting to the point where they have no other choice but to put a wage garnishment into play. Often creditors take action because they do not know about what’s going on in your life, except the fact that they are not being paid. They do not know about the layoff, or the sickness or the other circumstances that make paying the creditor impossible. If your circumstances change, contact your creditors and tell them; do not wait for them to call you after the account has become delinquent. The sooner you call, the more time you will have to work with your creditors.

If you haven’t communicated with your creditors, they will notify you that they are taking you to court to get a judgment against you. There is the name of a law firm and phone number on the legal documents. Before things get worse, call and see if you can still work out a payment arrangement. If so, there will be no garnishee. If not, your creditors will get judgment against you and collect on this judgment by way of a garnishment.

Once a garnishment starts, other than paying it in full, there are only two ways to stop the garnishment: file a consumer proposal or file bankruptcy, both of which must be filed by a licensed trustee (such as our team here at Hoyes Michalos).

Once a private sector creditor (a bank or credit card company) notifies you that they want to get a judgment against you, do not ignore it. When you find out that a payment arrangement is not possible or if you know before that you cannot afford a payment arrangement, call us at 310-PLAN. We will review your situation and work with you to find the best and most affordable solution for you and your family situation.

We will help you make a plan. Often that plan will involve a consumer proposal. A consumer proposal is often the best alternative because the monthly payments you will have to make are usually lower than what would be required in a bankruptcy, and the creditors get a partial payment of the balance. However, if a consumer proposal is not possible because your income is too low, then a bankruptcy may be the only remaining option.

Others may claim that they can have a garnishee released, but if their offer is less than what the garnishee would generate, the likely answer would be no. A Trustee must file either a Consumer Proposal or a Bankruptcy. If these are your only alternatives, contact us and we will help you with your problem.

In this article we have discussed banks and credit card companies. The rules for a Canada Revenue Agency (CRA) garnishment are different, so if you have CRA tax debts, please call us at 310-PLAN today for more information.

A consumer proposal is a settlement negotiated with your creditors. Here’s a simple example:

Orville and Mary Smith owe $50,000 on their credit cards, an unsecured line of credit, and a payday loan. They have jobs, but cannot afford to make all of their minimum payments each month, and they are falling behind. They don’t want to file bankruptcy, so instead they decide to file a consumer proposal, where they will offer to pay $400 per month for 50 months, for a total of $20,000. If the creditors accept the proposal, they have one affordable monthly payment, and at the end of the 50 months, their debts are officially discharged.

Sounds great! One monthly payment, the calls from bill collectors stop, you don’t have to worry about a wage garnishment, and you get a fresh start! How does it work?

The process starts by contacting the professionals at Hoyes, Michalos & Associates Inc. I suggest you start by completing our on-line, free, anonymous debt options calculator. It only takes a few seconds. If the calculator shows that a consumer proposal may be an option for you, you can e-mail us, or complete our on-line evaluation, or call us at 310-PLAN (310-7526, no area code required in Ontario) to arrange a no charge initial consultation.

At your initial consultation we will review what you own, who you owe, and what you earn and spend each month. Based on that information we will help you decide whether or not a consumer proposal is the correct option for you and your family. (If you want to speed up the process you can download our fresh start application before our first meeting).

Doug Hoyes Explains Consumer Proposals

If you decide to file a consumer proposal, we prepare the necessary documents, and you meet with us to sign them. Prior to filing the proposal, in addition to meeting with one of our client services specialists, you will also meet with one of our trustees, who are also licensed proposal administrators. They will review the process with you, and answer any further questions you may have.

As soon as you have signed the proposal paperwork, and before you leave our office, we electronically transmit your file to the government, so that we can give you your government-assigned file number. With that file number you can direct all calls from creditors to our office. As soon as you file your proposal, we talk to your creditors. In other words, once the creditors are notified of your proposal, the collection calls stop!

By law the creditors have 45 days to vote on your proposal. Each creditor gets one vote for every dollar they can prove that you owe. If 50% + 1 of your creditors vote in favour of your proposal, the proposal is approved, and all creditors are bound by it. That means that even if some creditors vote against your proposal, if a majority in dollar value accept it, the proposal is accepted.

What happens if more than half of my creditors vote “no”?

If more than half of the creditors vote against the proposal, we will contact them to confirm that they understood the terms of the proposal (since the proposal you offered should generate more money for the creditors than if you filed bankruptcy). We will also ask them if they wish to propose alternate terms. For example, if you offered $300 per month for 50 months, they may counter by asking for $300 per month for 60 months. You can then either reject or accept their counter offer.

At some point in 2011 Hoyes Michalos will file our 10,000th proposal, so obviously our longevity indicates that we have a very high success rate when filing proposals. In the vast majority of cases, if the proposal is reasonable, and if there are no unusual circumstances, your proposal should be accepted.

From your point of view, you have two important duties:

First, you will attend two credit counselling sessions. These sessions are designed to teach you some money management techniques, to help you avoid money problems in the future. The first session will occur within the first two months after filing, and the second session will generally occur between the third and seventh month. Each of the two sessions lasts for between 45 minutes and one hour, and they are all private sessions.

Second, you are required to make the agreed upon payment each month. We will set up your payments using our pre-authorized payment system, so your payments will be debited directly from your bank account, so you have no worries about bringing in cheques or making cash payments. We even let you decide the payment schedule. For example, if your proposal is for $400 per month, we can set it up so that you are paying $100 per week (if you get paid weekly), or $200 bi-weekly (if you get paid bi-weekly). I personally encourage weekly or bi-weekly payments, if it matches your pay schedule, because then in a month when you get your extra paycheque, you are making an extra payment in your proposal, and your proposal gets paid off faster.

In summary, for many people a proposal is a great way to have one manageable monthly payment to deal with their debts. If you want a fresh start, to find out more try our on-line, free, anonymous debt options calculator, then e-mail us, or complete our on-line evaluation, or call us at 310-PLAN (310-7526, no area code required in Ontario) to arrange a no charge initial consultation, and let’s get started.

You know you have a lot of debt, but you don’t fully realize the seriousness of your situation until you start getting calls, at home or at work, from bill collectors, looking for money. It’s not just the phone call that spurs people to action; it’s also the threat that the collection agent will take you to court and try to garnishee your wages.

One method collection agents use to emphasize this threat is to send you a letter with a Draft Statement of Claim, which is a document made to look like a court document. Since you probably don’t routinely see court documents, you may not realize that you are only being threatened with a lawsuit; you are not actually being sued, at least not yet.

Last week I received a phone call from Mark Silverthorn, a lawyer who has launched a one-man crusade against Draft Statements of Claim. He believes that in Ontario it’s actually illegal for collection agency lawyers to send Draft Statements of Claim, and he asked for my help in exposing this practice.

So, last Friday, I asked our videographer to film me interviewing Mark Silverthorn about this collection agency “dirty trick.” As you will see from the video I’m obviously not a professional interviewer, and I don’t have access to fancy television studios to make a high quality video. However, I believe we were able to explain the issue, and possible solutions.

I ended the video by explaining that if you are being harassed by collection agents it’s probably because you owe money. Collection agents don’t normally just go away on their own, so if you can’t make payment arrangements directly with them, I strongly recommend that you call our office at 310-PLAN (310-7526, no area code required in Ontario), or complete our on-line evaluation, or e-mail us, and one of our professionals can walk you through your options, including a consumer proposal.

You don’t need to feel threatened by collection agencies. There are options for dealing with your debt, so contact us today, and let’s get started.

Janette Martin and Banny Mendlowitz

Aside from the usual threats of commencing legal action or calling your employer or a wage garnishment, we sometimes hear stories of collection agencies that cross the line of harassment.

Many years ago, Benny Mendlowitz and I helped a husband and wife file bankruptcy here in Ontario. They had two small children. The wife called me one day, several months into her bankruptcy. She was crying. She told me that a collection agency had called her and told her that he knew where she dropped her children off each day for daycare and he also knew what church she belonged to. The collector told her that if they didn’t pay off their debt, then they better pray to the Father for forgiveness. He even knew the Father’s name.

More recently we did a bankruptcy for a Pastor. He called us one day to tell us that a collection agent attended one of his services and sat among the parishioners telling them of his bankruptcy and the debts he owed.

Not all stories are scary. Some can be humorous. I had a client that had made a promise to a collection agent that he would turn over all of his Christmas presents to the collector to try to settle a debt.

Most of the time a collection agent is just doing their job. Their job is to collect debts, so they call you as part of their job. Unfortunately some collection agents are rude, or will say or do things that are illegal. In fact, some collection agencies have been accused of violating the collection agency laws in Ontario. How? By sending Draft Statements of Claim that look like real legal documents, but are just another collection agency dirty trick.

How can you avoid these situations? Seek professional help as soon as you realize you can no longer handle your debts. If you can’t pay your debts, it’s better to deal with your debts now, instead of suffering through the stress of collection agency phone calls for weeks or months.

At Hoyes, Michalos & Associates we can help you evaluate your options for dealing with bill collectors, including filing a consumer proposal or personal bankruptcy. Once your creditors have been advised that you have filed they will stop calling you; from that point forward they are required to deal with your trustee at Hoyes, Michalos.

Are you receiving harassing phone calls from collection agencies? If you having a difficult time keeping up with your payments to your creditors, contact Hoyes Michalos for a free on-line review of your situation. Once we have gathered some financial information from you, we can explain your options and how each will affect you. We can answer any questions you have, and will be able to help you decide on a plan that is right for you.

I can be reached in our North York bankruptcy and consumer proposal office, by calling 310-PLAN (that’s 310-7526, no area code required, and that number works for all of our Ontario offices), or e-mail us today to arrange for a free initial consultation.

In this letter, the Ministry told the collection agencies operating in Ontario to stop sending people “draft” legal documents with their collections letters as this practice was deemed deceptive – it was a trick designed to scare people into making their payments.

After some comments and calls were made to our offices, I decided it might be helpful to warn people of some of the other common tricks that collections agents have been known to use to scare people – if you know something is a trick then you can either lodge a complaint about the agency or at the very least recognize the trick for what it is, a tactic designed to scare you…

So what are some of the more common tricks used by collection agencies?

First,  not disclosing who they are: many collection agents fail to mention the fact that they are a collection agent working on behalf of someone else.  When they call they simply tell you they are calling on behalf of “Big Bank” Visa.  The impression they give is that all of your dealings with the bank are in jeopardy and that if you don’t clear things up immediately the bank will take actions against you.   Well, the bank has already taken action – they’ve assigned the debt to a collection agency that is supposed to advise you in writing BEFORE they start calling that the bank has assigned your debt to them.  The banks do this because they don’t want to be the ones yelling at you to pay – it’s bad for their image.  In fact, if you send notice to the bank that controls your Visa that a collection agency in their employ is acting improperly there’s a good chance that agency will lose the bank’s contract.  Something to think about next time one of these agencies calls and is less than polite to you.

Second, providing incorrect advice:  many collection agencies will tell you over the phone that if you don’t make a payment by “Friday” they are going to garnishee your wages.  Well, in order to garnishee someone’s wages the agency first must take you to Court.  This involves opening a file at the Small Claims Court and you will receive a notice from the Court.  (The trick from the first article deals specifically with agencies giving you the false impression that they’ve already done this).  Once you receive the Court notice you have 3 weeks to respond.  After that it takes another few weeks to obtain a Court Order – none of this can be done quickly, certainly not by Friday.

Third, impolite (down right rude) behavior:  this is probably the thing that gives collections agencies such a bad reputation.  Many of the people in the industry think that by yelling at you, by degrading an insulting you, that by making you feel guilty about your inability to pay they can motivate you to give them some sort of payment.  Never, ever let these people get under your skin.  Never, ever yell back at them or become impolite yourself.  If someone is treating you in an unprofessional manner on the phone politely inform them that you don’t have to listen to them and end the phone call.  Many of these agencies record their calls (and they are required by law to advise you if they are) – if they can get you to sound like you are being unreasonable or rude to them it gives them a moral advantage which simply isn’t justified.  If you experience one of these rude calls either ask end the call as I have suggested, ask for the supervisor to complain and/or once the call is over lodge a complaint with the Ministry.

Here’s the contact information again for the Ministry of Small Business and Consumer Services:

Consumer Protections Branch
5775 Yonge Street, Suite 1500
Toronto, ON  M7A 2E5
Tel: 416-326-8802
Toll free: 1-800-889-9768
Fax: 416-326-8810

It is time for a reality check – if you have collection agencies calling you and sending letters then it’s time for you to consider whether or not you need some help to sort out your finances.  Collection agencies don’t call people unless they aren’t making their payments.  If you can’t make your payments then you should be speaking to a professional to determine just what you need to do to clean things up.

Many people don’t realize that they have options other than simply filing for bankruptcy.  This is another “trick” – if you don’t know you have options you won’t consider using one of them.  If you are taking calls from collection agencies, if you’re receiving demand letters in the mail then it is time to give us a call or e-mail us so we can explain to you your options and you can get a fresh start.

In this letter he warned all collection agencies to stop using the “trick” of sending “draft” legal documents with their cover letters and claims to people they were contacting. These draft legal documents made it appear that the collection agency was just about to initiate legal action against the person receiving the letter – the truth was it was a simple computer template designed to scare people into making payments.

The letter from the Registrar goes further and warns collection agencies using lawyers to ensure that the lawyers comply with all of the legal requirements and restrictions placed on the collection agencies themselves. That means the lawyers must clearly disclose who they have been retained by (who they are working for). For example, just stating that they are collecting for Visa is not sufficient, the letter must state if the lawyer is working directly for Visa or for a collection agent. Similarly, the lawyers are not permitted to attach “draft” Statements of Claim that give the impression that a lawsuit is pending. Again this trick is designed solely to scare people into making payments.

If you are receiving calls and/or letters from collection agents then you probably have a debt problem. The purpose of this posting is to make you aware of some of the tricks that have been used by such agents in the past and that the government is now trying to clamp down on. If you have received such “draft” letters or letters from lawyers that don’t identify who they are working for you should contact the following government office:

Consumer Protections Branch
5775 Yonge Street, Suite 1500
Toronto, ON M7A 2E5
Tel: 416-326-8802
Toll free: 1-800-889-9768
Fax: 416-326-8810

By sending copies of your letters to the government you will help to clean-up this deceptive practice on the part of collection agencies. This number can also be used for any other complaints or concerns you may have about collection agencies in general.

Having said all of that, the truth is if you have collection agencies calling you and sending you threatening letters then it’s time you spoke to a professional about dealing with your debts. Collection agents only contact people that are having payment problems – if you are experiencing this kind of problem then you should probably contact one of our professionals for a free initial consultation. 80% of the people that contact our office don’t need to file bankruptcy – they just need to talk to someone knowledgeable that can point them in the right direction to deal with their debts.

For more information, read our report on Dealing with Collection Agencies: How Can I Stop Collection Calls?, and then contact us to arrange a free initial consultation.