Hergott: The business of debt

Lawyer Paul Hergott tackles the issue of debt.

If you lose your financial footing, how do you stop the circling vultures from peck, peck, pecking away at you?

It would be an understatement to say that we are “encouraged” to go deeper and deeper in debt. Debt is almost rammed down our throats.

Credit cards are routinely peddled at check outs. Unsolicited credit card offers come in the mail. With ultra low interest rates, financing the purchase of bigger ticket household items and vehicles has become the norm.

According to statistics Canada, the ratio of household debt to personal disposable income increased from 66 per cent in 1980 to over 150 per cent by 2011, and is continuing to rise.

Why are we encouraged to borrow more and more money?

Credit is big business, and they get us coming and going.

Credit card companies are particularly bad. They push their high reward cards to you and me, and then stores are dinged 1.5 per cent of every purchase.

They are cashing in before the interest clock even starts to run. No wonder it’s so easy to get a credit card!

And defaulting borrowers are a cost of doing business. That’s true for any business that extends credit.

Is a layoff or other unforeseen event making it impossible to keep up with your debts? Please don’t let feelings of shame creep in there. Your default is a statistical expectation. They planned for it.

But like a dog with a bone, they’re not going to let go of collecting on that debt.

It’s not them so much as the debt collection company that gets paid a percentage of whatever they’re able to squeeze out of you.

Those are the circling vultures I was referring to, peck, peck, pecking at you.

Because they are paid based on success, they are highly motivated. That high motivation can lead to harassment.

There are laws to protect you from harassment in debt collection. In British Columbia, we have the Business Practices and Consumer Protection Act.

Here is a link to section 116 of that act, within Part 7, “Debt Collection”.

The descriptive heading for section 116 is “Communication with Debtor”.

Highlights from that section:

  1. There are very strict restrictions about contacting you at your place of employment. They are prohibited from doing so at all if they can contact you through your home address, telephone number or electronic mail address;
  2. You can stop telephone calls dead by giving them a mailing address and saying: “Communicate with me only in writing. Don’t ever call me or anyone else about this debt again!”; and
  3. If you tell them the debt is in dispute and that you’d like them to take the matter to court, they are prohibited from communicating with you at all, except through the court process.

Are they likely to use the “court process”? It depends. Debt collection is a business. It costs very little to make harassing phone calls. It costs a whole lot more in time and expense to commence and prosecute a legal action. Use option three and you might well find that you never hear from them again.

Will the debt haunt you for the rest of your life if you don’t pay it? Unlikely. Most debts disappear in a puff of smoke within two years unless a “court process” has been commenced to enforce the debt.

That is, unless you make a payment or do something else to, in the words of section 24 of the Limitation Act, “acknowledge liability”, which can result in the two year clock starting all over again.

Stopping the pecking provides only temporary relief. Debt stress can be very harmful to your physical and mental health. Reach out for help, both to treat as well as to take concrete steps to eliminate the stress.

I very strongly encourage anyone facing unmanageable debt to have a free initial consultation with a Trustee in Bankruptcy or other trusted consultant to learn about all sorts of options that might be available to you, ranging from eliminating debt and starting over through bankruptcy to a simple consolidation. There are all sorts of creative options that can help you regain your financial footing.

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