Do Nothing

Not many people are aware of the rights that their creditors have against them if they do not pay their creditors. We have heard stories of situations where bill collectors have advised the debtor that they were sending the police to arrest him for non-payment of accounts. The police will not arrest you and you can not go to jail for not paying your bills in Canada - there are no Debtor's prisons in Canada!

The only thing that can happen is that your creditors can sue you. In most cases there is no defense for not paying your bills and eventually the court will issue a judgement against you. A judgement allows your creditors to do any or all of the following things to you:

a) They can garnishee your wages
b) They can seize your assets, or
c) They can place a Writ against your assets

Garnishees

Garnishees make sense only if you have income that can be garnisheed. In Alberta a single person can earn $800 (net – after taxes) before a garnishing creditor gets a single cent. The creditor with a garnishee is entitled to one-half of the next $1,600 the person earns, plus all of everything over $2,400 that the person earns. An additional $200 of exempt income is available for each additional dependent that an individual may have.

If you have low income, it is not worthwhile for your creditors to garnishee your income.

Seizing Assets

Creditors can only seize assets that are secured or assets that are not protected by provincial legislation.

If you have only assets that are exempt from seizure, your creditors will have nothing that they can seize to pay their debts. If you have more specific concerns regarding your assets, you should discuss your concerns with a professional advisor.

Filing Writs

With the exception of Writs filed by Canada Revenue Agency, other Writs have no effect until the property is sold or refinanced. At that time the Writs will have to be removed by being paid, or by filing an assignment into bankruptcy or settled by completion of a Proposal.

If you have significant debts to Canada Revenue Agency, it is not advisable to delay considering the options that you have, because if you delay and the Writ is filed, your property is at risk. You should proceed immediately to discuss your situation with a professional financial advisor.

JUDGEMENT PROOF

If you are judgement proof, it means that you have no assets that can be seized, nor do you have income that is high enough to garnish. Effectively what this means is that even if a creditor is successful in obtaining a judgement against you, they will be unable to enforce it under the current provincial legislation.

When you are judgement proof, you do not have to take action to protect your income or your assets.

There is one very important caution if you find yourself with a judgement against you. If the creditors with judgments find out where you are banking, they can seize your bank account. It is important that you do not advise any creditors where you bank so that you can protect monies that you may have on deposit because those funds can be seized if the creditors know where you are banking even if you are judgement proof.