Being Sued or Threatened Over A Debt?

Facing Legal Action Over A Debt? Consider Your Options

Dealing with financial obligations can be overwhelming, especially when you’re in a position where you’re threatened with a lawsuit due to an overdue debt. This article aims to provide comprehensive information on how to navigate through such a situation and explore the possibility of filing for bankruptcy or a consumer proposal.

Understanding The Legal Process

Types of Court Involved In Debt Lawsuits

In Canada, there are two types of court that may be used to sue someone over a debt. If the total debt is under $25,000, a claim may be filed in Small Claims Court. For debts exceeding $25,000, the matter must be pursued in the Superior Court of the respective province.

The Role of Collection Companies

Collection companies commonly use the threat of a lawsuit as a final strategy to pressure individuals to make payments towards overdue debts. However, it’s worth noting that very few people are actually sued, but the threat is often enough to get your attention.

Filing For Bankruptcy: A Potential Shield?

When you file personal bankruptcy, a consumer proposal, or a Division I proposal (a more complex type of proposal for individuals with debts over $250,000 excluding their mortgage), an automatic Stay of Proceedings is enacted. This legal term indicates that legal actions against you are halted.

Stay of Proceedings: A Legal Safety Net

Regardless of the stage of the lawsuit, the Stay of Proceedings puts a stop to it. Even if the creditor has issued a Statement of Claim, obtained a Default Judgment, or started garnishing your pay, the Stay of Proceedings halts it all.

Should You File For Bankruptcy?

The decision to file for bankruptcy or a consumer proposal can be a complex one and should be made after careful consideration. It’s crucial to look at your overall financial situation, considering all your outstanding debts, not just the one you are being sued for.

Debt Analysis: A Key Step

Most people facing a lawsuit for an unpaid bill usually have more than one overdue debt. Depending on the total amount that you owe and your personal situation, filing for bankruptcy may make sense.

Embracing Alternatives

A consumer proposal might be a viable alternative as it offers the same protection as bankruptcy, with additional benefits. It’s definitely worth considering.

Seeking Professional Help

If you’re being threatened with a lawsuit over an unpaid debt, it’s advisable to contact a bankruptcy trustee to review your situation and options. A trustee can provide you with a clear understanding of the process and how bankruptcy might help you deal with the problem.

Concluding Thoughts: Navigating Financial Distress

Being sued or threatened over a debt can be a stressful experience. However, understanding your options, such as filing for bankruptcy or a consumer proposal, can offer some relief and a way forward. Always remember to seek professional advice before making any decisions to ensure you’re taking the best course of action for your specific situation.

In the end, it’s about managing your financial liabilities responsibly and taking the necessary steps to safeguard your financial future. After all, being informed and prepared is your best defense against financial distress.

Related Posts

  1. Automatic Stay of Proceedings in Bankruptcy
  2. Advantages Of Filing Bankruptcy in Canada
  3. Wage Garnishment Laws & Declaring Bankruptcy

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