What Should I Do If I Have a Notice of Claim for a Debt?
It’s a frightening situation – a knock on your door or a piece of registered mail delivers a Notice of Claim for a Debt. Panic sets in, your heart races, and you have no idea what to do next. Well, we’re here to guide you through the process and help you understand your options.
What is a Notice of Claim for a Debt?
A Notice of Claim, sometimes referred to as a Demand Letter, Claim, or Statement of Claim, is a formal document that you receive when you’ve failed to pay your debt based on the original terms you agreed to with your creditor. This notice typically arrives via registered mail or personal delivery, and it carries an official seal from a Provincial Small Claims Court or the Provincial Superior or Supreme Court.
“Being sued for a debt can be overwhelming and stressful, but understanding the process can help alleviate some of that stress.”
Steps to Take After Receiving a Notice of Claim
1. Respond to the Notice of Claim
First and foremost, do not ignore the Notice of Claim. Regardless of your financial situation or how you got to this point, it’s crucial to respond. If you don’t reply within the given time frame (usually 14 to 21 days), the claimant can obtain a default judgment, which can result in garnishment of your income or a lien against your property without further notice to you.
The documents you received should include the necessary forms for filing a response. If these aren’t present, get in touch with the court directly to ask how to respond.
2. Preparing for Court
After you’ve responded to the claim, a court date will be set. The court acts as a mediator between you and your creditor, and it will make a ruling on payment arrangements. If it’s determined that you cannot afford to repay the debt, the Judge could rule against the creditor, which means you may not have to pay the debt back.
3. Evaluate Your Payment Options
After replying to the notice and before your court date, it’s essential to consider your options for dealing with the debt. Most people can’t afford to risk having their wages garnished, as typically 30% of their gross income is taken until the debt is fully paid.
If you have the means to pay the creditor in full, contact them and make payment arrangements as soon as possible. If you’re unable to pay in full, you’ll need to review your options. It’s advisable to consult with a non-profit credit counselor to get an unbiased review of your options.
Being Sued for a Debt: Not the End of the World
Being sued for a debt can feel like a financial catastrophe, but taking the right steps can prevent it from becoming one. There are ways to prevent or stop income from being garnished, but it’s crucial to act quickly. The earlier you start addressing your debt, the more options you’ll have.
If you’re unsure about your budget or need help getting started with a plan, consider reaching out to a non-profit credit counselor for free, confidential help.
