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What Happens if a Creditor Takes Me to Court?

by:
Anna Guglielmi

It’s shaping up to be an average, normal-kind-of-day. You’re sipping coffee at your kitchen table and planning a full day of errands. When all of a sudden, you hear a knock at your door. As you open the door, a man asks in a stern voice, “Are you Ms. X?” You reply with a nervous “yes” as he hands you an unmarked envelope. “You’ve been served,” he announces, and then turns on his heel and walks away.  

Uncertain of what just happened, you open the envelope. It reads that you have been served with a Statement of Claim and that you are being sued for that credit card debt that hasn’t been paid in quite some time. Panic starts to set in. What do you do now?

When Will a Creditor Take You to Court?

A creditor rarely uses legal action as a first attempt to collect on an outstanding debt. There are usually many warnings ahead of being sued, mostly in the form of collection calls and letters.  It’s never a good idea to ignore creditor communication. Always keep in touch, even if it’s just to explain that you can’t make your payments and why.  

If you’re experiencing a certain hardship in your life that’s impeding your ability to pay, consider writing a letter or email explaining your situation, what you expect to happen, and what payments (if any) you can make—and keep a copy for your records! You will likely continue to receive collection calls, as unpleasant as they may be, but it’s better to answer them and offer a payment arrangement if possible. Keep a log of your communication with the creditor, so you can reference the conversations as well. You may also get letters marked URGENT, stressing a call back within a set time frame (e.g. 10 days). Return the creditor’s call so they’re aware that you’re trying to keep lines of communication open.  

Understanding the Court Process

In Ontario, once you’ve been served it is very important that you file a Defence. This means that you’ll need to go to the Court House listed on the Statement of Claim and File a Defence within 20 calendar days of being served.  

If you choose not to file a Defence, this means that you have opted to accept the charges against you and you do not want to dispute. The creditor will be awarded a Default Judgement and this can result in a lien or seizure of an asset or a wage garnishment. 

To file a Defence, you will need to file a Form 9A (Defence) and attach all supporting information. In this form, you can admit that you owe the full amount of the claim, or part of the claim, and propose a payment arrangement. For example, you can admit to owing the balance of $5,497 and agree to make monthly payments of $300 until the balance is paid off in full. You’ll also need to pay the filing fee and monitor your mail for any correspondence from the Court House. Be sure to always verify the next steps in the process with the Court Clerk when filing a Defence.  

You can also review the Ontario online Guide to Replying to a Claim.  

Where Can You Turn To for Help or Support?

The following professionals will be able to provide you with guidance and support during this process:

  • A Certified Credit Counsellor. As a not-for-profit and registered charity, Credit Canada's credit counsellors can review your situation and help you understand your full financial picture, free of charge. We will also guide you towards different options, such as debt consolidation, that will help you move forward without having to resort to bankruptcy.  
  • Small Claims Court Duty Counsel Services. These are pro-bono lawyers who help low-income individuals wanting to represent themselves in Court; however, you must meet specific criteria to acquire their services.
  • A Paralegal/Lawyer. For a directory of qualified professionals, you can visit the Law Society of Upper Canada.  
  • Legal Aid. Free legal aid may be available for low-income individuals.  
  • JusticeNet. This not-for-profit service helps people in need of legal expertise, whose income is too high to access legal aid and too low to afford standard legal fees. JusticeNet is currently available to anyone living in Ontario. Visit their website for more info.   

Being taken to court by a creditor can be scary and intimidating, especially if you don't know the process or what to do next, and the result can be wage garnishment or more. Remember, the best way to avoid this is to at least make minimum payments on debts, and if you can’t do that, speak to your creditors and let them know of your situation. Try to work out a payment arrangement; they usually prefer to get something versus nothing—just be sure to get the agreement in writing! If you don't want to face this alone or feel you simply can’t manage your personal debts and need some extra help, Credit Canada is here standing by.

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Topics: Collection Agencies

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