“Can Unsecured Creditors Take My Car If I Don’t Pay My Debt” is a concern that many individuals struggling with debt have.
Your car loan is a secured debt, and if you do not pay your secured loan your secured creditor – in this case the financial company that lent you money for the car – is able to seize your vehicle.
However, what about a Judgment Creditor? A judgement creditor is an unsecured creditor that has gotten a judgment against you for an unpaid debt. So, the question is can my car be seized by an unsecured creditor if I don’t pay an unsecured debt?
An unsecured creditor would hold an unsecured debt, such as a payday loan or your credit cards, so if you do not pay your credit card bills or on your payday loan, can the unsecured creditor seize your vehicle to recover their monies on your unsecured debt?
If you fail to pay your unsecured debt, for example a payday loan or your credit card bill, your unsecured creditor won’t have any claim to your vehicle.
However, if you don’t pay your payday loan or credit card bill as agreed, your unsecured creditor has the right to apply to the court for a judgement against you.
The judgement will be for the unsecured debt in question and the creditor can ask for a Writ of Seizure or Writ of Execution against your car.
This means that your unsecured creditor could potentially seize your vehicle if you do not pay your unsecured debt.
In What Situation Will An Unsecured Creditor Ask For a Writ of Seizure / Execution?
In Ontario there is a law known as the Execution Act, which lays out the assets that a person can keep in bankruptcy or in a seizure for non-payment situation.
The value of equity in a car that an individual can keep in a seizure situation in Ontario is $6,600.
Claiming Your Exemption is Required
The Ontario laws surrounding exemptions for creditor action requires that a debtor takes certain steps in order to protect their exempt assets that have been seized.
When an exempt asset is seized, the sheriff or bailiff must notify the owner that they have a right to claim an exemption against the seizure.
The claim must be made within 5 days, otherwise your exemption will expire.
Your unsecured creditor might make a judgement against you to seize your car, hoping that you don’t claim your exemption within the 5 day period.
If you do not claim your exemption within 5 days, your unsecured creditor with a judgement can sell your car.
If you make a claim in time but you do not recover your seized vehicle from the sheriff or bailiff in a reasonable period of time (there is no definition of “reasonable time” in the law), you also lose your exemption and the unsecured creditor can sell your vehicle.
The Law Gives You the Right to Consent to a Sale
If your vehicle or other asset that is exempt has been seized, you have the right to consent to have the item sold.
The proceeds from the sale will cover the sale cost and the remaining proceeds up to your exemption limit will go to you.
What Should I Do if I’ve Been Sued by Unsecured Creditors?
If you have been sued by your creditor you must pay attention to any notice you receive, and you must reply to any necessary summons.
If your car, or any other asset, has been seized by creditors you must take action.
Should you like to recover your asset, or the money from the sale of the asset, you must submit a claim for the exemption within 5 days.
Filing for bankruptcy or making a consumer proposal can stop a Writ of Seizure or another lawsuit.
If you have been sued you might want to talk to a lawyer, or if you cannot afford to service your debts, you should speak with a Licensed Insolvency Trustee about your options.