My name is Doug Hoyes, and in over 25 years of working with people in financial difficulty I have discovered that each of us has our own unique “breaking point”, the point at which our debt becomes more than we can handle, and we have to take action.
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What are your trigger points?
For some people the trigger is the first time they miss a payment. For others, they can miss many payments before it becomes an issue.
A call from a collection agent about an overdue debt is often the “straw that breaks the camel’s back”. However, we all have caller I.D. and voice messaging, so many people are able to ignore phone calls and voice mail messages for many months. Every person is different.
Letters threatening legal action are often the spark that causes people to contact a professional at Hoyes Michalos. Of course threatening letters do not always lead to legal action, so it takes more than a letter to scare many people into action.
In virtually all cases the final trigger for most people in debt is a wage garnishment. It’s possible to ignore phone calls, voice mail messages and threatening letters, but most people cannot afford to ignore having real money taken from their paycheque each week. A wage garnishment almost always requires action. For many people, that is the “last straw”.
So can you just up and walk away from your debts?
The do-nothing strategy does work in very limited circumstances. If you don’t have a job, or if your creditors don’t know where you work, a wage garnishment may not be a problem. In that case you are what we call “creditor proof”. It’s like being “bullet proof”, like Superman. Bad guys would shoot Superman and he didn’t get hurt. If you are creditor proof they can take you to court, but if you have no wages to garnishee or no wages to seize, you don’t have to take action. For some people with debt, this is the right solution. You just tell your creditors if they call you are not working and have no money to pay.
However, it’s important to note that the debts themselves won’t go away. If you return to work, you now have income that can be garnisheed. So for some people, the right answer isn’t so much to run away from debts, but to temporarily ignore them.
What about the limitations period?
What about the statute of limitations? If your debts are old, can you ignore those debts? The Ontario Limitations Act states that if you haven’t made any payments on a debt for two years, if a creditor sues you your defense would be that the debt is outside the limitations period, and assuming you are in court to defend yourself, the judge would not grant them a judgement against you. Without a judgement, they can’t garnishee your wages.
However it’s important to know that the debt itself doesn’t go away. You still owe the money and these debts will show up on your credit report with a note that they are in collections, and will remain there for up to six years. Also, some debts are not included like government debts including student loan debt and tax debt.
Can you leave the country?
If you owe money in Canada but live abroad, you may not need to file bankruptcy or a consumer proposal to avoid those debts. However, if you have income or assets in Canada, or are expecting to return, you may want to talk to a trustee about dealing with your Canadian debts sooner rather than later.
What Are Your Options?
Do you really want to run from your debts forever? Do you really want to run the risk of phone calls and legal action? Do you want to have the ability to borrow in the future, which is very difficult if you have a lot of debt on your credit report?
For most people, the answer is “no, I don’t want to run from my debts forever. I want to deal with my debts so I can have a fresh start.” That means considering whether a bankruptcy or consumer proposal make sense given your personal financial situation.
If you are tired of running from your debts, give us a call at 1-866-747-0660 and we can explain how you can get a fresh start.