No matter how much effort you put into paying your overdue debts, there will be situations where a creditor can take you to court and have you sued. You want to avoid getting into such a sticky situation, as much as possible. However, sometimes, things take a wrong turn and it happens.
A creditor usually decides to sue within the first 6 months of defaulting on your debt. That is the statutory timeline for a bank in Canada to keep the debts on their records. After which they will sell it to a collection agency to collect.
In Alberta, a court notice will be served to the debtor stating that he/she is being sued and they have 20 days to respond. So, what are the options available to you after such a notice?
This is possible if you are on assistance or can prove you don’t have any income. You should not have any assets under your name also. The creditor may get a judgment against you, but will not be able to enforce it, in this case. If the principal residence (your home) is the only asset you own, the judgment will be filed against the property and the debt will be paid out, sometimes with post and pre-judgment interest when the asset is sold or refinanced. When there is an income scenario, Garnishment could also happen.Doing nothing is an option which carries quite a bit of risk. It is important you understand your own situation before taking this route.
If the debtor has been sued, it might be necessary to file a defense which will buy time. This time can be used to negotiate with the creditor, to see if a settlement can be arranged.
Considering that you are in a tight financial spot, you may not have the option to hire a lawyer since you can’t afford one. In such a case, you can at least get legal help based on financial hardship.
You have the option of filing for a Consumer Proposal or Bankruptcy under the Bankruptcy and Insolvency Act. This is the best option to stop the creditors from taking further action. In my opinion, it is also the cheapest option than any one of the above choices. But, the best way to decide, what should be done will depend on the age, income, family situation etc. Any decision in haste will make the debtor repent later on. We have helped many individuals under this scenario, take an informed decision.
Once you get the court notice, it is important that you weigh your options, consider your situation and make a decision quickly. This way you can stop any further action from the debtor.