Can a collection agency sue you in Canada?

You’ve had a string of bad luck, and you owe money. You lost your job, run out of emergency savings, and are unable to pay the bills. A collection agency now has possession of your debt.

In an attempt to collect the money, the creditors and collection agencies threaten to take legal action. Can a collection agency sue you in Canada?

In this article, we’ll discuss dealing with debt collectors. We look at whether a collection agency can actually sue you and what happens when they take you to court. We also review what a collection agency can and cannot do.

Can a Collection Agency Sue Me?

If you’ve stopped making payment on your debts, you may be wondering if a creditor can sue you in Canada. The easy answer is yes. However, depending on the age of the debt, your creditor may not be able to.

Every province and territory in Canada has its own collection laws, and the statute of limitations on being sued by creditors. It’s best to speak with a Licensed Insolvency Trustee (LIT) who knows the laws in your home province or territory.

Is a Collection Agency Able to Send You to Court?

Yes, a collection agency that has purchased the uncollected debt from a creditor has every right to take you to court if you refuse to pay. While they can do that, it’s quite rare that an agency will take you to court unless the debt is at least six months outstanding.

A common tactic by creditors and debt collectors to collect the debt is to say they’ll take you to court, even if it isn’t true. It’s quite costly in legal fees and time consuming for these parties to take you to court. In most cases, it’s only done as a last resort if your outstanding debts can justify the cost or your assets are sufficient to pay the debts.

What Occurs When You’re Taken to Court?

Let’s say you haven’t made your payments for six months, and your creditors or the debt collector is getting ready to sue you. Here’s what will happen next.

The plaintiff, the creditor or debt collector, will file a lawsuit in the courts. You will receive a notification. It’s at this point that you have to file a defense. If you fail to do that, the other parties will automatically be declared the winners.

If you choose to defend yourself in court, a date will be chosen for your trial. You must be present at your trial date as well as your creditor or the debt collector. One of two things will happen in the trial.

Your creditors will win the trial and get a judgment against you. This judgment will require that you pay all or some of the debt owing. Your creditors or the debt collection agencies will be granted new powers to collect the money owing to them, including bank account and wage garnishment.

If you and your lawyers are successful, there won’t be any judgment awarded.

Can a Collection Agency Take Away Your Home?

If a creditor or debt collector is successful and wins the case, they get a judgment against you. When that happens, they’re able to file a judgment in the local Land Titles Office on your home or other properties that you owe. They call this registering a lien. If you fail to pay the judgment, your creditors or debt collector can get a court order to sell your home.

It’s important to note that some creditors have more powers than others. For example, a mortgage lender can seize property if you’ve defaulted on the mortgage without going through the courts. The Canada Revenue Agency can also put a lien at your home if you fail to pay your taxes all without going to court.

Can they garnish my wages?

If a creditor or debt collector successfully files a judgment against you in court, they have the legal right to garnish your wages. The garnished amount and how the garnishment takes place depends on the debt you owe, where you reside, and your income.

What other things can collection agencies do?

There are limits to what collection agencies can do. For example, a collection agency cannot charge you additional interest in the debt they’re trying to collect. However, the amount they’re attempting to collect from you may already include interest.

A collection agency can garnish money in your bank account with a court judgment against you. Bank account and wage garnishment can cause a lot of headaches for you. They can happen with very little notice, leading you to default on other debt payments, doing more damage to your credit score and credit report.

The rules for garnishing bank accounts and wages vary by province and territory, so be sure to speak with a LIT.

What Can You Do When the Collection Agent Calls?

Collection agents will often call and use various tactics to obtain the money that’s owed to them and your creditors. Agents may threaten to take you to court, criminally prosecuting you, garnishing your wages, or putting you in jail, even when they don’t have the authority to do this. It’s not unheard of for agents to provide fake documents that say these actions will happen within a short period of time.

The fact of the matter is that collectors must take you to court and win the case before they can do this. The provinces and territories have laws in place to protect against overly aggressive collection practices. It’s important to know your rights, so you aren’t taken advantage of. A LIT can help bring you up to speed on your rights.


Can a collection agency sue you in Canada? The simple way to stop the collection call is to acknowledge the debt and pay the debts you owe, whether it’s a credit card or mortgage debt. If you’re unable to do that, you can protect yourself, at least by knowing your rights.

If you need help in dealing with collection agencies, call our offices today. We can put you in touch with a LIT to help improve your situation with creditors.

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