What Happens If You Don’t Pay a Collection Agency?

Understanding the Consequences of Not Paying a Collection Agency

Are you constantly being hounded by a collection agency or a debt collector? It’s distressing, but it’s crucial to know how to effectively handle these daunting scenarios.

What Happens If You Don’t Pay a Collection Agency? The repercussions can be serious, potentially leading you to court. The likelihood of such a scenario depends on factors such as the amount you owe, the duration of the debt, and more.

This article will guide you through why a collection agency might be after you, how to react to such situations, and the possible consequences if you fail to settle your debt.

The Involvement of Debt Collection Agencies

How does a collection agency get involved in your financial matters? There are two possible ways: debt assignment and debt purchase.

Debt Assignment

In this scenario, the collection agency is working on behalf of your creditor (could be a credit card company or a payday loan office) to recover the debt you owe. If the agency successfully collects the debt, they keep a percentage as their fee and forward the rest to the creditor.

Buying of Accounts

In this case, the collection agency buys the debt from your creditor. This means you no longer owe the original lender anything; your debt is now with the collection agency. In this situation, your credit score is likely already affected by the delinquent account with the lender.

As far as you, the debtor, are concerned, the result is the same whether the collection agency is assigned to collect the debt or has bought the account outright – they will try to collect the debt from you.

Reacting to a Debt Collection Agency Call

Receiving an unexpected call from someone who knows about your financial situation can be quite distressing. Whether these calls are genuine attempts by debt collectors to recover money or scams, it’s crucial to handle them appropriately.

Is this a Legitimate Debt or a Scam?

First and foremost, confirm whether you really owe the debt. In most jurisdictions, debt collection agencies are required to notify you in writing before reaching out via phone. If they fail to provide such information or if their behavior is abusive or threatening, they might not be legitimate.

If you’re convinced that you do not owe the amount they’re demanding, the call is likely a scam, and you can safely ignore it.

Paying the Debt

If you’re certain you owe the money the collection agent is calling about, you can arrange to pay the account. Once they receive payment, the collection account is closed, and you won’t receive any more calls regarding that account.

Ignoring the Debt

Ignoring calls from collection agencies is always an option, but is it a wise one? If you simply do not have the money to pay your debts or your credit cards have gotten out of hand, you might feel you have no other choice.

Remember, there are specific rules that debt collectors must follow, and understanding these can enable you to better handle these situations.

Rules for Lawful Debt Collection

The Financial Consumer Agency of Canada provides several rules that debt collectors must follow:


  • They can only call you during specific hours.
  • They can contact your family, friends or employer, but only to get your phone number.
  • They cannot use threats or abusive language.
  • They cannot pressure your friends or family to pay your debts for you.


Consequences of Not Paying a Collection Agency

The outcome of not paying a collection agency can vary depending on the situation.

Is the Debt Very Small?

If the debt is small (say, less than $1,000), the collection agency might not sue you as the legal costs could be greater than the potential award. However, they might still threaten to sue you or even send a lawyer’s letter to persuade you to pay.

Is the Debt Very Old?

In some cases, you might no longer be legally required to pay the debt because it has passed the time period laid out in your region’s Statute of Limitations. Even though some collectors might still try to collect, they are unlikely to win if they took the matter to court.

Are you “Creditor-Proof”?

If you have a low income and few assets, you might be ” creditor-proof.” In such cases, even if the agency successfully sued you, there’s nothing they could collect.

However, it’s crucial to consult with a professional such as an accountant, lawyer, or Licensed Insolvency Trustee to ensure you’re indeed safe from creditors.

Will the Collection Agency Continue to Call?

Unless the agency is convinced there’s no possibility you’ll pay the account, the collector will likely continue to call unless you take further action to resolve your debts.

Can Debt Collection Affect Your Credit Score?

When accounts are so overdue that they are assigned or sold to collection agencies, your credit rating has probably already been negatively impacted. These debts will be assigned an “R9” rating on your credit report – the same rating as a bankruptcy.

What if You’re Sued by the Debt Collector?

If a debt collector sues you, you will receive a Statement of Claim. You have a set number of days to respond – or not – to the Statement of Claim. If you fail to respond, the court will likely find in favor of the creditor. Once the creditor has secured this Judgment against you, they can proceed with wage garnishment, freeze your bank account, or seize certain property – within legal limits – to realize the value of the debt owed.

Overwhelmed? Seek Help

If you’re overwhelmed by debt collection calls, there’s help available. In Canada, a Licensed Insolvency Trustee (LIT) can assist in all insolvency situations. They can advise you on various debt relief options, from a debt management plan to bankruptcy.

If a consumer proposal or bankruptcy is the solution, the LIT will guide you through the process.

Ready to take the first step toward financial success? Find a Licensed Insolvency Trustee in your area today.

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