Credit is simply the ability to receive a thing, service or other benefit now, with a promise to pay for it later. The person who provides the money, service or item is called a creditor. Some examples of common credit arrangements are...
- store charge accounts
- credit cards, whether from a department store, gas station or bank
- "rent-to-own" agreements
- bank loans (personal loans, mortgages or personal guarantees)
- home utility accounts for telephone, electrical or natural gas services
Applying for Credit
Whether or not a business is willing to offer you credit is up to that business. Businesses are in the business of selling products or services at a profit. They will generally want your business, if it will help them to make their profit.
When a business decides whether or not to extend credit to you, they must balance their desire to sell you a service or product against the inconvenience of not being paid right away and the risk of not getting paid at all.
The business will ask for information from you to help them assess the risk of giving you credit. Some of the things they may ask for are proof of income, employment history, a statement of assets and debts, whether you own your home, how long you have lived at your current residence, and marital status. Most will also check your credit rating.
When a business considers offering you credit, it may ask a credit reporting agency for your credit report. Looking at information about how you handled other debts - your credit history - and other factors helps the business decide whether or not to give new credit.
Credit reporting agencies collect and sell information relating to a person's credit history. Individuals, financial institutions and other businesses may report debts or loan applications that you have with them to a credit reporting agency. The report may include information such as your name and address, different loans or credit cards that you have with them and information about your payment history. In Saskatchewan, The Credit Reporting Act licenses and regulates credit reporting agencies. All credit reporting agencies must be licensed. These agencies have a responsibility to provide accurate and fair information.
Any information included in a credit report must be based on the most reliable evidence reasonably available. Unfavourable personal information cannot be included unless reasonable efforts have been made to ensure its accuracy. Information about a first time bankruptcy that was discharged six years or more ago and other unfavourable information (i.e. regarding debts, court judgments and criminal convictions or other matters) that is more than six years old cannot be included unless it was voluntarily provided by you. The credit report cannot contain information about your race, creed, colour, ancestry, ethnic origin or political affiliation. Information cannot be included in a credit report unless the name and address of the source of the information is also included or can be readily determined by you.
The information in your credit file can only be released to certain individuals, such as someone who requires the information to make a decision about your application for credit, insurance, employment, tenancy or other legitimate business purpose. The person requesting the credit report must get your consent or give you written notice that a credit report will be obtained and provide you with the name and address of the credit reporting agency that will provide the report. Information in a credit report can be released to government or police agencies without your consent and without notice.
You may request access to your credit report and are entitled to all the information in your file, including the sources of the information and the names of anyone to whom a credit report has been provided in the last six months, free of charge.
Although it is an offence to knowingly supply false or misleading information to a credit reporting agency, mistakes can occur. If you feel that your credit report contains inaccurate or incomplete information, you are entitled to notify the agency in writing that you wish to dispute the accuracy of the information contained on your file. The agency must then investigate the matter and correct any errors and delete any information that they are unable to verify. The agency will also notify anyone that has received your credit report in the last twelve months about the corrections, unless you request otherwise.
If, after the investigation, the agency is still of the opinion that the information on file is reasonably accurate and should not be deleted, the agency will notify you of your right to file a brief statement setting forth the nature of your dispute. Once your statement is received your file will clearly note that the information is disputed. Your statement disputing the information, or an accurate summary of it, will be attached to your credit report and from then on, form part of your credit file. As well, anyone who received a credit report in the preceding six months will be advised of any deletions or disputes, unless you request otherwise.
Credit Reports and Scores
Credit reports provide a summary of your financial history and include information about your borrowing activity and payment history. Your credit score is determined by using a statistical formula to take personal information from your credit report and other sources and translate it into a three-digit score. Lenders can then use this score to predict the likelihood that you will repay the debt. The type of information used to calculate your credit score includes...
- Payment history - indicates whether you have made your credit card payments, loan payments and other payments on time
- Amounts owed - compares how much you owe to your credit limits with various lenders
- Length of time on file - indicates how long you have had credit accounts
- New credit - shows how often you are looking for new credit and how you handle accounts you have recently opened
- Type of credit - considers the type of loans you have - car loans, lines of credit, credit card balances
Having a bad credit rating can cause problems when you apply for new credit. However, it can be just as much trouble to have no credit rating at all. This can happen in a spousal relationship where only one of the partners manages or controls household finances. This may have significant consequences in the event of a relationship breakdown or the death of the partner with financial control. A bank or business might be reluctant to grant credit to a spouse without a credit record. The spouse may be denied credit altogether, or be forced to have someone co-sign or guarantee the indebtedness.
For this reason, it is important for spouses to establish their own credit rating. Keeping credit cards or charge accounts in their own name - when they are paid on time - can help spouses establish a positive credit rating in their own right. Establishing a good credit rating is something that either spouse can do on their own, without the consent or involvement of the other spouse.
Many items that people buy are purchased using a bank loan or under a sales agreement with a business. Businesses and banks that lend credit or money usually require that the person pay back the money "with interest" through monthly payments. This means that, in addition to paying back the amount you borrowed, each monthly payment will include a borrowing charge called "interest." The interest rate is a percentage of the amount owing. If a payment is missed you may be charged interest on the amount owing, including past interest. This is sometimes called interest on interest.
It is important for people to know just how much extra it will cost them to pay later for goods or to borrow money. People may want to shop around for the best deals or reconsider a loan or purchase if the cost is too high. So how do you find out about credit charges? The law in Saskatchewan requires creditors to disclose certain information when they advertise credit arrangements. If the credit being offered is for a loan of a sum of money or for the purchase of goods the ad must disclose both the interest rate and the total cost of borrowing the money. Consumers should be aware however that ads where space or time is limited, for example radio, television or billboard ads, are not required to disclose the total cost of the credit. Advertisements for things like lines of credit where the total amount borrowed and the interest rate can change over time, must tell consumers what the starting interest rate is and any other finance charges.
Creditors must also provide you with additional information when you enter into a credit agreement. Depending on the type of credit agreement, you must be informed of a number of things including the interest rate, the circumstances where interest will be added to principal, how your payments will be divided between principal and interest and the total cost of the credit (i.e. the difference between the value of what you will receive and the total amount you will pay the lender).
Borrowing money or receiving goods on credit almost always results in the borrower paying interest or credit charges. However, it is common to see offers to "pay no interest" until a certain date. Saskatchewan law requires creditors who make "interest free" offers to tell consumers about any strings that may be attached to the offer. For example, an ad that entices people to buy furniture with "no money down and no payments or interest" until a year later must also disclose whether interest still builds up during this period but does not have to be paid, if there are any conditions attached to the offer, what those conditions are and the amount of interest that would have to be paid if the conditions are not met. If the ad does not disclose the information required by law it will be assumed that unconditional interest-free credit is being offered. Similarly if a creditor offers to allow you to miss a payment and make it up later the creditor must tell you if you will be paying interest on the missed payment.
But how much interest may a creditor charge? Under the federal Interest Act a person may agree to any rate of interest that they feel is reasonable. However, this may be restricted by other federal legislation. For example, the Criminal Code says that the maximum amount of annual interest allowed by law is 60%. Charging an annual interest rate that exceeds 60% is a criminal offence and could result in up to five years in jail.
The Interest Act also specifies that where interest is payable under an agreement but the actual interest rate is not provided, the interest rate will be five percent per year. Both federal and provincial laws offer protection from questionable creditors who are in a position to take advantage of individuals.
Another way Saskatchewan people are protected from excessively high interest rates is The Consumer Protection Act. The Act prohibits unfair business practices that have a goal of taking advantage of a consumer. Retail businesses cannot include terms or conditions within an agreement that are harsh, oppressive or excessively one-sided. This means that a creditor cannot include an excessively high interest rate because it would place a difficult responsibility on the consumer and make the terms of the agreement too one-sided. The Act also does not allow a business to sell goods at a price that grossly exceeds the price that a consumer might pay for the goods elsewhere. If the interest rate is unreasonably high then this provision of the Act could be violated.
Whatever the interest rate, the faster you pay off the debt the less interest you will pay. Under Saskatchewan law, except for mortgages, you are entitled to pay off the full amount of the loan at any time without prepayment charges or penalties. You are also entitled to pay more than is due on any payment date. If you pay the full amount owing you are entitled to a refund of a portion of any finance charges you paid for the loan.
All too often people ignore provisions in lending agreements that deal with interest charges. Individuals must protect themselves by knowing their rights. Read your lending agreement carefully to ensure that the annual interest is written into it, that the agreement is reasonable and that the total price, with interest and charges, is included. This should allow you to know exactly what you are spending and avoid unpleasant surprises in the future.
Insurance and Optional Services
Sometimes creditors require you to purchase insurance on a loan. Creditors may themselves sell this type of insurance. However, under Saskatchewan law you can purchase loan insurance from another company. You may want to do this if you are able to get a better price elsewhere. The creditor has the right to not agree to a different insurer but only if there are reasonable grounds.
When you enter into a credit arrangement you may agree to buy other optional services. For example, you may buy a vacuum on credit and also agree to purchase repair and maintenance services. If you later decide you do not want these services you can cancel with 30 days' notice.
Using credit may seem harmless and can help to get what you need or want right away. Of course, when you use credit, it always leads to something most people find less pleasant. No matter how quickly you intend to pay for the thing you have received, credit arrangements always create debt.
In its simplest form, debt is an obligation for you to pay another person at some time in the future. The agreement to pay can be oral or written. An oral agreement is a spoken agreement between two or more people. People who know each other often make oral agreements. Other times the agreement will be in writing. A written agreement usually states the amount owed, the interest rate and when payments are due. The person who owes money is called the debtor.
Most credit arrangements are voluntary. When you choose to enter a credit agreement, you accept the obligation to pay in the future and agree to the payment terms. Some kinds of debt are not voluntary. Rather, they are obligations to pay which are imposed by law, not by voluntary agreements. Involuntary debt can include things like spousal or child maintenance, property taxes or income taxes. Although you may have not explicitly agreed to these debts you still have a legal obligation to pay them.
Secured and Unsecured Debt
It is important to distinguish between secured and unsecured debt, as the distinction will affect the methods a creditor can use to collect the debt.
Secured debts are when you borrow money and promise the creditor money or goods, also called "security" or "collateral," if you don't repay the debt. The creditor can seize the security or collateral if you don't pay back the debt as agreed, or if you break other terms of the agreement. A mortgage creates a secure debt as well as many car or furniture loans. The creditor can register the security agreement with the Personal Property Registry. Before purchasing goods, potential buyers can search the registry to see if a creditor has a prior claim on the goods.
A secured creditor cannot enter your home to repossess goods given as security or collateral without your permission or by agreement. If the secured creditor is not able to repossess the goods, they may go to court to get an order for you to hand over the goods, and may also get an order against you for any further money owing on the goods.
Unsecured debts are when you do not give the creditor security or collateral. If you don't pay an unsecured debt, the creditor must sue you to get a court judgment that will allow the creditor to collect the debt.
Co-signing a Loan/Personal Guarantee
If you co-sign a loan you are agreeing in writing, along with the borrower, to repay the debt to the creditor. A guarantee is similar, in that you are promising to make good on the debt if the borrower fails to make payments. In either case, you do not have to have control over the loan proceeds or otherwise benefit from the loan to be legally bound to pay the debt.
For example, you may have co-signed your spouse's loan application or guaranteed a promissory note for the family business. If your spouse or the family business cannot make payments, the creditor will look to you to pay the debt. It doesn't matter whether you have received or spent any of the money. The fact that you co-signed or guaranteed the loan makes you just as liable to the creditor as if you borrowed the money in your own name and spent it all yourself. In fact, the creditor may have more means of collecting the debt against you as a guarantor than it does against the borrower. You should consult a lawyer prior to co‑signing a loan or signing a guarantee.
Your credit rating can also be affected if you are not able to pay the loan that you have co-signed or guaranteed for someone else. You should be sure that you can pay the other person's loan and be prepared to do so, if called upon by the creditor.
Even if the principal borrower makes payments, having co‑signed or guaranteed a loan can affect your ability to get credit for yourself. A creditor may see that you have a potential liability under the other person's loan and decide that adding another liability in your own right is too much of a risk, in case you are called on at some point to make payments as a co-signer or guarantor for the first loan.
You are not automatically responsible for your spouse's debts. Spouses may have monetary obligations to each other, but the only debts both spouses are responsible to creditors for are...
- where one spouse co-signs a loan for the other spouse
- where both agree with the creditor that they are both responsible for the debt
- when one spouse guarantees to the creditor the debts of the other spouse by signing a guarantee document
Types of Debts
Any time you owe money you create a debt. There are many kinds of debts.
Ordinary bills, such as monthly utility bills or telephone bills, are forms of debts. These are generally unsecured debts. Utility companies may ask for a deposit or for a co-signer when you apply for the service.
You create a debt when you get a loan from a bank, credit union, finance company or other financial institution. Two legal documents often used with a loan are a promissory note and a security agreement. A promissory note states the details of repayment and includes the debtor's written promise to pay. A security agreement states which of the debtor's property is the security or collateral, and what the creditor can do if the debtor does not pay. Banks, credit unions and finance companies often ask for a co-signer or guarantor in addition to taking security for a loan.
Ongoing contracts require you to pay regularly over time for services or products you receive over that time such as...
- diet centres
- health club instruction or equipment rental at a health club
- travel clubs
These ongoing contracts are generally unsecured debts. Sometimes they ask for a co-signer, who is equally responsible for the payments.
While there is generally no automatic right to cancel a contract unless the contract gives that right, Saskatchewan law does provide some protections and cancellation rights for certain types of ongoing contracts.
You can cancel any contract signed at a door-to-door sale or made over the phone within ten days of signing the contract.
There are also special protections and cancellation rights concerning "Personal Development Services Contracts" and "Travel Club Contracts."
Personal Development Services Contracts are agreements for services related to things like health, fitness, dieting, modelling and talent, photo shoots, martial arts, sports and dancing. Here, it is important to note that if the contract is with a non-profit, a co-operative, a private club owned primarily by its members or an organization funded or run by the government or a charity, the rules do not apply.
Travel Club Contracts are membership agreements that give the consumer the right to discounts or other benefits when purchasing travel or vacation-related services such as transportation and accommodations.
Contracts for personal development services and travel club contracts must be in writing and contain certain information that can confirm what the purchaser and the seller have agreed to and how to exercise their rights. A copy of the written agreement, containing all the required information, must be sent to the purchaser within 15 days of when the agreement was made. It can be sent by email, fax, mail or any other way that allows the seller to prove the purchaser received it.
These agreements must include contact information for the seller including their name, telephone number and address and other contact information such as fax number and email address, if the seller uses these means to conduct business. The agreement must indicate the date the agreement was entered into and, if applicable, when the contract starts and when it ends. The goods, services, discounts or benefits must be fairly and accurately described and there must be information about the full purchase price of the goods or services, including things like taxes and shipping charges, if applicable. If payment is to be made in something other than Canadian currency this must be specified. As well, the agreement must describe any additional charges, such as customs or brokerage fees, that may apply to the sale. There must also be information about when and how the goods and/or services will be supplied and when and how payments must be made.
Personal development services contracts and travel club contracts can be cancelled within one year of the purchaser having received a copy of the contract, if the contract does not contain the required information. Personal development services contracts and travel club contracts must include information about the purchaser's rights to cancel these types of contracts.
In addition a purchaser can cancel a personal development services contract, without any reason, up to seven days after the purchaser receives the contract or up to when all the services agreed to are available, whichever is later. A personal development services contract can also be cancelled if there are significant changes to the purchaser's personal circumstances or to the services provided. If the purchaser has a physical, medical or mental disability that makes it unreasonable or unsafe for the purchaser to continue with the program the contract can be cancelled. If the purchaser relocates after the contract was signed and is now 30 kilometers further away from where the services are the contract can also be cancelled. The contract can also be cancelled if the services are no longer available or if the services are no longer substantially available because the seller has gone out of business or changed its business.
Similarly, a purchaser can cancel a travel club contract, without any reason, up to ten days after receiving a written copy of the contract. A purchaser can also cancel a contract of this type if the services, discounts or other benefits become unavailable or substantially unavailable because the club goes out of business or changes its business.
To cancel a contract the purchaser must give the seller notice of cancellation. This can be sent by personal service, registered mail or in any way provided for in the contract. Once a contract is cancelled it is as if it never existed as far as the law is concerned. Cancelling a contract also cancels things like any guarantee the purchaser may have given, credit extended as part of the contract or the right to take pre-authorized payments. On application, if a court finds that it would be unfair to cancel a contract, the court can make any order concerning the contract that the court considers appropriate in the circumstances.
If a travel or personal development services contract is cancelled the purchaser is entitled to a full or a partial refund, depending on whether some services or benefits have been provided.
Using a credit card is another way of creating a debt. A credit card represents a contract between you and the credit card company. Most banks, department stores and gas stations have their own credit cards. Generally, credit card debts are unsecured debts. Credit card companies charge interest on any unpaid amount and usually require a minimum monthly payment.
Credit card companies cannot send you credit cards in the mail that you did not apply for. Under Saskatchewan law a credit card application must show the interest rate of the card, whether there is a "grace" period that is interest-free and the amount of any other finance charges or fees.
The credit card agreement must also tell the card holder the extent to which they are responsible for unauthorized transactions. You will be responsible for a maximum of $50 or the amount set by your agreement, whichever is less. You will not be responsible for any amount if your card is lost or stolen and the purchases were made after you notified the company that the card was lost or stolen. If someone uses your number, without your agreement, you are also not responsible for any charges if you notify the company within 30 days of receiving your statement that someone else used your number. You can notify the credit card company of lost or stolen credit cards or unauthorized use of your card number verbally or in writing.
Retail Sales Credit
People create debts when a store allows them to buy goods without paying at the time they receive the goods. For example, a store may sell a television and allow you to make monthly payments. The store will then usually ask you to sign a security agreement.
Some stores rent televisions, video and audio equipment or furniture, under a contract that allows you to become the owner after a certain number of rental payments. Often, there is a payment at the end of the lease to buy the equipment. If you stop making payments the contract ends. The rental company may then take back or repossess the equipment or furniture. Regardless of how many payments you may have made, you only become the owner when the contract is complete, that is, when you have made each and every payment as required.
Maintenance payments are debts that one spouse or parent owes to the other spouse or parent for spousal or child support after separation. Maintenance payments result from a court order or an agreement between the spouses or parents.
Maintenance payments and arrears are a special form of debt. A garnishment for maintenance or arrears will be paid before any other debts in situations where several creditors try to collect from a debtor who is in financial trouble. Maintenance payments and arrears are not wiped out or reduced if a debtor declares bankruptcy. Only a judge can reduce or cancel maintenance payments or arrears.
Maintenance payments are the one kind of debt where failure to pay can result in a jail sentence. The Maintenance Enforcement Office in Regina can collect maintenance payments for the spouse or parent. For detailed information on maintenance orders and agreements, see PLEA's publication When Couples Separate.
Municipal taxes are based on property ownership and are secured against the property. Property taxes are related to the fair market value of a particular piece of property - owners of higher valued property will pay higher taxes than owners of lower valued property. The term used for a municipal property tax rate is "mill rate." The mill rate is the dollars of tax placed on one thousand dollars of property value.
Income tax is a tax that anyone who earns income must pay to the Canada Revenue Agency (CRA), unless exempt. You calculate the amount owing by completing a tax return. If an employer deducts less tax than the amount owing, the employee owes the difference to CRA. Taxes may also be owing if you are self-employed, or receive other income from which taxes are not deducted and you have not paid tax installments. CRA reviews tax returns, and may not allow some deductions. In this case you may owe more taxes. The amount of tax owing becomes a debt you owe to CRA.
If you disagree about the amount owing, you can file an Objection. To object to an assessment means that you think the law was applied incorrectly. You should contact CRA at 1-800-959-5525 or visit www.cra-arc.gc.ca/ and search for "Objections." You can appeal the decision on the Objection to a court.
Taxation on Reserves
Individuals who come within the definition of "Indian" in the Indian Act are exempt from paying income taxes on income located on a reserve.
The exemption also applies to personal property located on a reserve. By legislation, Treaty benefits are considered to be located on reserve, regardless of where they actually are.
People who are registered under the Indian Act also do not pay provincial sales tax (PST) or federal sales tax (GST/HST) on items delivered to a reserve and do not pay PST or GST if they make a purchase from a business located on a reserve. They also do not pay GST on services purchased on a reserve and performed on a reserve, for example, having a house on a reserve painted or getting a haircut from a business located on a reserve.
Reserve land is also exempt from property taxation by government. First Nations, however, can tax reserve lands.
A mortgage is created when you borrow money and give property as security. Most mortgages are used to purchase land or buildings. Mortgages can be arranged with financial institutions such as mortgage companies, trust companies, banks and credit unions. Individuals can also give a loan and take a mortgage as security. The creditor registers the mortgage against the property's title with the Information Services Corporation (ISC), the province's land registry system. Mortgages are a form of secured loans and the property acts as the collateral or security. Registering the mortgage informs others that the creditor has claim to money from the sale of the property or claim to the property if the loan is not paid.
The federal and provincial governments provide assistance for full‑time, post-secondary students under the Canada‑Saskatchewan Integrated Student Loans Programs. These loans are interest free while a student is in full-time studies. Loan repayment must begin no later than six months after full-time studies end. Although no payments are required to be made during the first six months after full-time studies end, interest will accumulate during this period.
When a Debtor Cannot Pay
Many times, and for various reasons, a debtor cannot make payments. People lose their jobs, debt loads become too high and other emergencies come up that use extra funds. You can usually make alternate repayment plans as soon as payments become a problem. If you and the creditor do not agree to other repayment plans, the creditor may take steps to collect the amount owing.
When a debtor cannot make payments, they can often take steps to prevent further problems. The debtor can try to work out a new payment plan with the creditor, get another person or agency to help work out a plan (mediate), or get help from one financial institution to consolidate or join all the debts into one payment. If these methods do not help, the debtor may make a consumer proposal that the creditors may accept. As a last resort the debtor may consider bankruptcy.
|The Credit Counselling Society is a non-profit agency that provides free credit counselling and debt consolidations services. For more information about debt management, consolidation loans and orders, debt settlement programs and tips for dealing with creditors visit www.nomoredebts.org or call 1-888-527-8999.|
Prepare a Budget
A budget can help you manage a current debt load or get out of debt altogether. Sometimes a budget can prevent serious debt problems. Budget plans come in various forms, from simple record-keeping to sophisticated schemes. A person can get information on budgets and budgeting from governments, libraries, money management counsellors, banks, credit unions and other financial firms.
Talk to the Creditor
You can let the creditor know when there is or may be difficulty in making a payment. The creditor and you may be able to work out a plan to make a partial payment. If the problem is temporary, a creditor may let you miss a payment and make it up later. In some circumstances, the creditor may lower payments for a few months. It is a good idea to contact the creditor before missing any payments.
Consider a Consolidation Loan
If you have several debts and cannot make the payments you may want to consider consolidating your debts. To consolidate means to get a new loan from a financial institution to pay all the debts. You work out a consolidation loan with a lending institution such as a bank, credit union or trust company. After paying off your debts you then have only one monthly payment on the new loan. This single monthly payment is often less than the total monthly payments of all the old debts. Creditors may require security for a consolidation loan.
Apply for a Debt Management Program
A debt management program is an informal voluntary arrangement to pay off your unsecured debts in full. These programs can give you more time to pay off these debts and reduce the interest rate. They allow you to make one monthly payment based on your individual circumstances. Payments are then passed on to your creditors. A counsellor can work with you to prepare a budget and discuss repayment plans with your creditors. These programs deal with personal debts, but not business debts. To qualify you must...
- have the agreement of your creditors, and
- be unable to meet financial obligations to creditors
- not be bankrupt
- be able to pay off the debts in full within a three to five year period unless the creditors agree to a longer period or accept a settlement
A credit counsellor can help you determine if this type of program is right for your situation. The programs are available for a fee from both for-profit businesses and non-profit organizations. Businesses will typically charge more for their services than non-profit organizations. For more information visit Credit Counselling Canada, a national association of not-for-profit credit counselling agencies and Orderly Payment of Debt programs, at www.creditcounsellingcanada.ca.
Make a Consumer Proposal
A consumer proposal is an offer you make to your creditors to modify your payments. The process is administered by a bankruptcy trustee. Creditors must generally be offered more than they would receive if you declared bankruptcy. You may propose to lower your monthly payments over a longer period of time, or to pay a percentage of the debt in full satisfaction of the entire debt. If the proposal is accepted it is legally binding, and unsecured creditors cannot use a judgment to take legal steps, such as seizing property or garnisheeing wages, to recover the debt.
To make a consumer proposal, you must not have debts greater than $250,000, excluding a home mortgage, and must be unable to meet the debt obligations as they become due. The term of the proposal cannot exceed five years. Consumer proposals by bankrupts must be approved and the bankrupt must have a trustee who will administer the consumer proposal. Other debtors must also have a trustee, who may be a bankruptcy trustee or someone appointed by the Superintendent of Bankruptcy. Debtors must pay a filing fee, as well as the trustee's fees.
The trustee will...
- assess the debtor's financial situation
- look at the underlying causes of the debtor's financial problems
- determine the need for counselling
- provide for financial counselling, which may include learning how to budget or cope with substance abuse or gambling addictions
- prepare the consumer proposal and have the debtor sign the required forms
The trustee will file the proposal with the Office of the Superintendent of Bankruptcy and submit it to your creditors. Creditors are asked to accept or reject the proposal. Creditors will have up to 45 days to consider the proposal or call a meeting. If enough creditors accept the proposal, the proposal becomes binding on the debtor and creditors. If the proposal is fully performed, the administrator will give the debtor a certificate, and the debtor will be relieved of the debts covered in the proposal.
If the proposal is rejected, creditors will be able to take legal steps to recover the debt. If the proposal was accepted, but the debtor failed to make all payments required under the proposal, it may be annulled. The creditors can then take legal actions to recover the entire original debt, minus any amount paid to them under the proposal.
Bankruptcy is a last resort. It is a legal process that stops any legal proceedings started by unsecured creditors to collect what is claimed by them, and ultimately cancels most debts. Under a bankruptcy, secured creditors are treated differently than other creditors. They can seize and sell assets covered by their security agreement, even after bankruptcy proceedings have begun. They may also make a claim for any unsecured portion of the debt as part of the bankruptcy. To file for bankruptcy, you must have debts of at least $1000, and be able to show that you are unable to pay your debts now or in the future.
In Saskatchewan, a first bankruptcy generally stays on your credit rating for six years, and will seriously affect your ability to get credit. A second or subsequent bankruptcy will remain on your credit report for 14 years. It will be a major factor that creditors consider when deciding whether or not to grant you new credit in the future.
Filing for Bankruptcy
To file for bankruptcy you must contact a bankruptcy trustee. Trustees can be found under "Bankruptcy" in the yellow pages of the phone book or a trustee registry search of the Office of the Superintendent of Bankruptcy website at www.ic.gc.ca. A bankruptcy trustee will charge a fee for performing duties related to the bankruptcy, although many offer free initial consultations. A trustee may refuse to accept a bankruptcy if, for example, you do not have enough assets to pay the trustee's fees. If you cannot find a trustee to accept the bankruptcy, you can contact the Office of the Superintendent of Bankruptcy (OSB), a branch of Industry Canada. The OSB's Bankruptcy Assistance Program may be able to assist you if you have written refusals from two other trustees and meet other requirements.
Once a trustee accepts the bankruptcy, they take charge of your assets. You no longer have any rights to any assets the trustee takes. The trustee acts on behalf of all your creditors to distribute the assets. Creditors file their claims with the trustee. Unsecured creditors cannot take any other legal actions against you during the bankruptcy unless the court gives them permission.
The trustee may then set up a meeting with your creditors and yourself to discuss the bankruptcy. The trustee will sell your assets and divide the proceeds among your creditors. You may also be required to make additional payments if you have surplus income. The trustee's fees for these services also come out of the proceeds. You will be required to attend financial counselling sessions that can help you better understand the causes of your bankruptcy and provide information about managing your financial affairs in the future.
Exempt Goods and Property
A trustee will sell your assets to help satisfy your debts. However, certain assets are exempt from seizure, meaning that you will be allowed to keep them in spite of the bankruptcy. These items include...
- furniture and appliances up to a value of $4500 (or $10,000 for a farm)
- tools of your trade up to $4500
- a vehicle that is necessary to carry out your duties while at work
- RRSP's and pensions
- certain life insurance policies
The first $32,000 of your home is also exempt from seizure. However, most mortgages allow the creditor to call the mortgage due and foreclose if you declare bankruptcy. A creditor may allow you to keep your house if you can pay the mortgage payments. Farmers can generally keep the home quarter. There are also other exemptions that apply to farm assets such as seed sufficient to plant the next year's crop as well as livestock and equipment for 12 months.
Discharge from Bankruptcy
A discharge from bankruptcy releases you from the legal obligation to repay debts included under the bankruptcy. Generally, if the trustee and the creditors agree, a first-time bankrupt is eligible for an automatic discharge nine months after the date of the bankruptcy. A first-time bankrupt who is found to have what is considered "surplus income" is eligible for an automatic discharge only after contributing part of their surplus to help pay creditors for a period of 21 months. You will not qualify for an automatic discharge if you do not receive the counselling that is required under your bankruptcy.
If you are not eligible for an automatic discharge the trustee will file a report with the court and provide copies to any creditors. You may be required to attend a discharge hearing. Following the hearing the judge may grant an absolute discharge, a conditional discharge, a suspended discharge or the judge can refuse the discharge. An absolute discharge means the bankruptcy process is over and you are released from your debts. A suspended discharge is the same as an absolute discharge except that it does not take effect until the specified date.
If the judge grants a conditional discharge, you must meet the conditions before the court grants the discharge. A condition may be that you pay a portion of your wages to the trustee for the next year or two. The court sometimes orders that some debts, such as debts from court judgments in personal injury cases, be paid in full before a discharge will be granted.
The court rarely delays the discharge or refuses to grant a discharge. Refusal may happen if the debtor...
- is guilty of fraud
- commits an offence under the Bankruptcy and Insolvency Act, such as fraudulently disposing of property or transferring assets to family members
- fails to comply with any order of the court
- does not cooperate during the bankruptcy
After the Discharge
Bankruptcy does not affect all debts. Debts such as court fines, maintenance payments, and debts obtained by fraud must be repaid. A student loan cannot be discharged until seven years after you cease to be a full or part time student. After five years you can make an application to the court to have a student loan discharged on the basis of hardship. You are still able to apply for credit, even before the discharge, although your credit history will be a factor. If the credit applied for is more than $1000, you must reveal that you are an undischarged bankrupt person.
After the discharge, you regain many of the rights you had before bankruptcy. You can own property and apply for credit. However, a bankruptcy recorded in your personal credit record remains there for six years, if it is a first time bankruptcy, and 14 years if it is not your first bankruptcy. If you apply for credit, the creditor may check your credit record. Many creditors refuse to give credit to someone who has had a bankruptcy, especially a recent one. The creditor may give credit if you can give security for the loan.
What a Creditor Can Do
Regardless of how a debt arises, there is a legal obligation to pay. If you have difficulty making payments, you may be able to re-finance your obligations or make alternate arrangements with the creditors. If you miss payments and do not work out an arrangement with the creditor, the creditor may choose other methods to collect the debt and take additional action to recover their costs of collecting the debt.
Debts do not go away after a certain time. What does go away is the creditor's right to sue for an unpaid debt. For many debts, the creditor can sue you anytime up to two years after the last time you acknowledged the debt. You acknowledge a debt by making a payment or otherwise expressing in writing that the debt exists.
The law sometimes extends the time, for example, when the creditor is under a mental disability. There is no time limit for collecting maintenance payments and in some cases the Crown may be exempt from limitation periods.
Although the right to sue on the debt may only last two years, the right to enforce a court judgment lasts for ten years. If there is still money owing under the judgment and the time limit for collecting is running out, a creditor can apply to renew the judgment. The creditor will then be able to collect on this judgment for another ten years. The creditor can take steps to enforce or collect the judgment during this time. Limitation periods should always be discussed with a lawyer at the earliest possible time.
One of the terms of a credit agreement can be that the debtor has to pay default charges if payments are not made on time. These kinds of charges are sometimes called late payment charges. However, under Saskatchewan law these charges can only be for reasonable legal costs to recover the debt. If the debt is a secured debt the creditor can charge reasonable costs, including legal costs, they incurred to take possession of the asset used to secure the debt. The creditor can also charge a reasonable amount for costs incurred because the debtor paid with a cheque that bounced.
Refuse to Provide Service
A creditor may refuse to provide any further services after missed payments. For example, creditors such as utility or telephone companies have the authority to cut off services when payments have been missed.
A creditor can demand that you repay the whole amount borrowed if you cannot make scheduled payments, but only if the agreement contains an "acceleration clause." An acceleration clause states that the whole debt becomes due if payments are not made as agreed upon. Creditors must serve you with written notice that you have defaulted on a payment if they want to accelerate the loan. Payment on the loan cannot be accelerated until at least ten days after this notice was sent.
When you miss a payment, a creditor may choose to turn the debt over to a collection agency. The collection agency usually gets a percentage of the amount it collects. Creditors often use collection agencies for smaller debts because it saves time. Both the federal and provincial governments turn unpaid student loans over to collection agencies. A collection agent's power to collect is no greater than the creditor's. For example, they cannot do things like seize a bank account, unless they have a judgment.
Collection agents must be reasonable in their efforts to collect. They cannot phone you late at night or harass your family or employer. They cannot try to collect more than the amount owing. They cannot call before 8 a.m. or after 9 p.m. and they cannot call on Sundays or holidays. If a collection agency unfairly bothers you a complaint can be made to the Consumer Protection Division of Saskatchewan Justice in Regina.
Repossess Secured Goods
When you miss one or more payments or break other promises in a security agreement, a secured creditor may repossess the goods that you gave as security for the loan. The secured creditor can seize the goods personally or can hire a private bailiff. The person seizing the goods must have the debtor's permission to enter the debtor's home. If the debtor allows the creditor or private bailiff into the home, that person can repossess only those goods in the home that were given as security.
No one can enter your home without your permission. Using force to enter someone's home is a criminal offence. A secured creditor can repossess security on the property without your permission, such as a car parked in the driveway. If you see the secured creditor or private bailiff repossessing something on your property, you can ask them to leave. If they do not leave when asked to do so, they are trespassing. You may want to refuse entry, at least temporarily, to have time to get legal or financial help. In some security agreements, the debtor gives written permission to the creditor or creditor's agent to enter onto the property. A creditor's agent is anyone acting for the creditor such as a private bailiff. The problem will not go away just because you refuse to allow the creditor in the door. The secured creditor can get a court order requiring you to give up the goods.
Depending on the agreement, the debt can be wiped out after the creditor repossesses and sells the goods. This means the creditor cannot get more money from you even if the creditor sells the goods for less than the amount owing under the agreement. On the other hand, there are situations where secured creditors can seize and sell the goods and go back to you for any amount still owing. If the item sells for more than the amount of the debt, any money left over can go to you but in some cases other secured creditors will have first claim on any surplus.
A secured creditor must serve a notice on you if they intend to repossess certain articles. These articles include household appliances such as a washing machine, a stove, a heater, a sewing machine, a refrigerator or a freezer.
There are special rules for repossessing farm machinery. For example, The Saskatchewan Farm Security Act requires a creditor to serve notice before seizing any of the farmer's security (see the PLEA publication Farm Financial Difficulties).
An unsecured creditor cannot repossess goods. This creditor must first sue you in court and get a judgment.
Place a Lien on Goods or Property
A lien is a right that a creditor has in the property of another person, to help secure payment of money owing to the creditor.
One of the most common kinds of lien is called a Builder's Lien. This arises when contractors, workers or other suppliers help to construct a new building, renovate a property or otherwise improve land. Because they have made an improvement to the land or buildings, they can claim a lien against the property. Generally, the property owner will need to clear up any liens before the land can be sold or mortgaged. In Saskatchewan, this type of lien is dealt with under The Builders' Lien Act.
The Commercial Liens Act deals with most other types of liens. There are three basic types of liens covered by this Act. A repairer's lien arises when a person, such as a mechanic, provides services to improve, repair or maintain property or goods. A storer's lien occurs when goods are held in storage. A carrier's lien is in relation to goods that have been transported from one place to another. A carrier's lien can also apply to towing a vehicle. In all cases, the purpose of the lien is to help secure payment to the person who provided the service or made the improvement to the item.
For a lien claim to be enforceable under The Commercial Liens Act, the person who asks for the services (the debtor) must have an interest in the goods, be in possession of the goods or be legally entitled to possess the goods that are subject to the lien. A lien only secures payment of the amount that the person who asked for the service agreed to pay. It cannot secure payment of any other debt owing to the creditor. If no agreement was made on the amount to be paid, the lien is for the fair market value of the services provided by the creditor. If the service provider chooses to terminate the contract before it is completed, they cannot claim a lien on the goods.
To be able to enforce a commercial lien, a creditor needs to either keep possession of the goods or have the person who asks for the service sign a written statement. The written statement must authorize the service or acknowledge an obligation to pay for the service. The statement must describe the goods that are subject to any lien.
If the person who asked for the service has signed an authorization or acknowledgement, then the creditor can give up possession of the goods and not lose the lien. However, to protect the lien claim, the creditor must register it with the Personal Property Registry. This must be done within 15 days of giving up possession of the goods, or the creditor risks losing priority of the lien claim to other creditors or claimants.
If the bill is not paid within 30 days of the due date, the creditor may have the right to sell the goods to pay the debt owing for services. If a lien claimant has given up possession of the goods, only the Sheriff can seize the goods back, to deliver to the lien claimant.
The rules regarding which lien holders or other creditors have a better interest in the goods, and the procedure for selling the goods, can be complicated. Lien claimants should seek legal advice with respect to lien claims and selling goods that are under a lien.
Sue the Debtor in Court
There are certain situations where a creditor can collect a debt from a third party without first getting a judgment against the debtor. These include when the debtor owes money for income taxes or employment insurance overpayments, as well as in some cases when money is owed for child or spousal support. In these cases the creditor may be able to collect the debt from a third party such as an employer or a financial institution where the debtor has accounts.
In other cases, before an unsecured creditor can take certain actions to recover a debt, they must sue the debtor in court and get a judgment against the debtor.
Before starting a court action the creditor, collection agency or the creditor's lawyer will generally send a letter demanding payment. This letter is called a demand letter. The demand letter gives the debtor notice of the debt and states that if the debtor does not pay by a certain date, the creditor will sue in court.
Although a demand letter is the usual first step before suing for a debt, going to court does not always follow. At this time or any time during the court process, the creditor and the debtor may settle the claim. A settlement can include a new payment schedule or even an agreement to pay a lesser amount.
Choose the Court
A creditor may sue in Small Claims Court or the Court of Queen's Bench. Suing in Small Claims Court is usually quicker and cheaper than suing in the Court of Queen's Bench. Neither party needs a lawyer in Small Claims Court, but generally a lawyer is needed in the Court of Queen's Bench.
A creditor cannot choose Small Claims Court unless the debt is less than the monetary limit for a Small Claim. For information about monetary limits, check with your nearest Court House. Currently, the limit for Small Claims Court is $20,000.
Sometimes a creditor is owed two or more separate debts by the same person. In this case, the creditor may bring two or more claims against the debtor in Small Claims Court as long as each claim is under the limit. If a debt is greater than the limit but the creditor will accept an amount equal to or less than the limit as full payment, the creditor can still go to Small Claims Court (for more information on Small Claims Court, see the PLEA publication Small Claims Court).
If the creditor is suing for an amount more than the Small Claims Court limit they must go to the Court of Queen's Bench. This court has a simplified procedure for claim amounts up to $100,000.
Starting an Action
An action in the Court of Queen's Bench is started with a Statement of Claim. This is served on the debtor who must then file a Statement of Defence. If the debtor does not file a Defence to the claim in Court of Queen's Bench the creditor may obtain a judgment without a trial. If the debtor does file a Defence to the creditor's claim, an examination for discovery may be held.
This procedure allows one party to find out before the trial what the other party is going to say. An examination for discovery is not usually held if the claim is for less than $100,000.
The creditor must show the court that there is a debt, the amount of the debt, and that the creditor is owed this debt by the debtor. The court hears the evidence and gives a judgment. A judgment in favour of the creditor states the amount the debtor owes. This amount may include an award of costs to help pay some of the creditor's legal expenses.
A judgment does not guarantee payment of the debt. It simply means that the court agrees there is a debt of a certain amount and allows the creditor to use legal means to collect the debt if the debtor does not pay. A judgment lasts for ten years. If there is still money owing under the judgment and the time limit for collecting is running out, a creditor can apply to renew the judgment for another ten years.
Collect on a Judgment
Once the creditor has a judgment the debtor often pays the full amount of the judgment. If the debtor cannot pay, the creditor and debtor may agree upon a payment schedule.
If the debtor does not pay the amount of a Small Claims Court judgment and does not work out a payment plan, a creditor must wait 30 days from the date of the judgment before using other legal means to collect. This 30-day period gives the debtor time to appeal. If the debtor does not file an appeal, the creditor can then use legal means to collect the amount of the judgment. A creditor with a Small Claims Court judgment must file a Certificate of Judgment at the Court of Queen's Bench for enforcement.
In the Court of Queen's Bench, there is no 30-day waiting period before the creditor can enforce the judgment.
A creditor can collect on a judgment by having the Sheriff seize assets of the debtor such as money in a bank account, wages or assets such as a car or boat. The Sheriff's Office is in charge of the seizure process and creditors pay fees for their services. Creditors may be able to recover the enforcement costs by adding them to what the debtor already owes them. Once the Sheriff has seized assets they can be used to satisfy the judgment. The creditor must complete certain steps before these actions can be taken.
Registration of the Judgment
The first step in enforcing a judgment is to register the judgment. Once the creditor registers the judgment with the Judgment Registry they can use legal processes to collect on the judgment and also share in any money that is collected on behalf of other creditors who have registered judgments against the same debtor.
If a creditor wants the option to possibly enforce the judgments against land the debtor owns, the judgment must also be registered with the Lands Titles Registry.
Once a creditor has registered their judgment they give the Sheriff enforcement instructions. This can be a general statement that they want the Sheriff to collect from the debtor's wages, personal goods and lands. However, more specific instructions that include things like the name of the debtor's employer or the name and branch of a bank where the debtor has an account is often provided. Creditors must also provide a list of all property the debtor owns and its location, to the best of their knowledge. Other documents such as a certified copy of the judgment and the results of Land Titles and ISC Personal Property Registry searches must also be included.
Disclosure by Debtor
A creditor who has a judgment against a debtor can send a questionnaire to the debtor to find out what money and property the debtor has that could be accessed to pay the judgment. The debtor must complete the questionnaire and return it to the creditor within 10 days of receiving it.
If the debtor does not complete the questionnaire the creditor can ask the Sheriff to serve a notice on the debtor requiring the debtor to provide information about what money and property they have within 10 days of receiving the notice. This notice must be served on the debtor in person.
If the debtor still does not provide the required information the creditor can ask the Sheriff to issue a Notice for an Appointment for Examination of the debtor. This is a meeting that the debtor must attend to answer questions under oath. A judge is not at the meeting but a court reporter is. The creditor can ask the debtor any questions about their assets and finances. Questions may include...
- what does the debtor own
- what is the value of the goods and property
- are the goods used as security for any other debts
- how much does the debtor earn
- what day does the debtor get paid
- have the assets been improperly transferred to another person
- does the debtor have bank accounts
The court reporter records the creditor's questions and the debtor's answers.
If a third party owes the debtor money the Sheriff can serve a notice that requires that person to give the money to the Sheriff instead of paying the debtor. The money is then put towards what the debtor owes to any creditors with a judgment against the debtor. After the money has been seized by the Sheriff, the Sheriff notifies the debtor that the money has been seized.
The Sheriff can serve notice on a specific branch to seize any money the debtor has in an account at that branch on that day. If the money is in a joint bank account the Sheriff can seize the debtor's portion of the account. If there is no money in the account that day no money can be seized. The Sheriff can try another day or try a bank account at a different bank or branch.
The bank may have the right to take the money in the account and apply it against its own loans first. The bank can take the money even if the debtor is not behind in payments on the bank loan. A creditor may seize the debtor's term deposits, or other investments at the bank but Registered Retirement Savings Plans are not subject to seizure. A creditor cannot seize money that the debtor holds in trust for someone else.
Wages or Salary
The Sheriff can seize all wages owing to a debtor in the next two years as they come due. This means that a notice only has to be served on the employer once every two years and the employer must continue to turn over the debtor's wages every time the debtor is paid for the next two years or until the debt is satisfied. Employers are prohibited from letting an employee go because the employer has been served with a notice that the employee's wages are being seized.
Seizing and Selling Personal Property
The Sheriff can seize and sell personal property belonging to the debtor to pay the judgment. Personal property includes personal belongings such as vehicles, furniture or appliances. The debtor can redeem the seized property by paying the amount owed under the judgment.
The Sheriff or their deputies have the right to enter the debtor's land or premises (except the debtor's home) to seize goods. They can do things like breaking open gates or doors if these things are necessary to access property they are seizing. However, if the debtor asks them to leave they cannot proceed any further without getting a court order. The Sheriff cannot enter the debtor's home without the debtor's consent or a court order. However, a debtor can be ordered to pay the costs of a court application if they have refused entry.
Seizing and Selling Land
Land a debtor owns can be seized and sold and the proceeds can be used to pay the judgment. The Sheriff must wait twelve months after seizing the land to sell it, unless the creditor applies to court to have this time shortened.
Sheriffs cannot seize any property that they believe is exempt or is likely to be exempt. Debtors receive a notice that explains that certain property may be exempt from seizure and a form to be used to make an exemption claim. The Sheriff must consider any exemption claim and make a decision about whether the property should be exempt. The debtor will be informed of the decision and can appeal to the court if they do not agree with it.
If a debtor's wages are seized, the greater of 70% of the wages per month or $1500 per month plus $300 per month for each dependant are exempt from seizure. A debtor can apply to court to have this exemption amount increased because of special circumstances and a creditor can apply to have it decreased based on the amount of other exempt property the debtor has to support themselves and their family.
If money in an account is seized the debtor can keep up to $1500 plus $300 for each dependant, if the money is needed to support the family for the next month. In deciding if the money is needed for the support of the family the amount of exempt wages the debtor is entitled to in that month is considered.
The Sheriff cannot seize money owing to the debtor from most federal and provincial social programs. Examples of funds that cannot be seized include employment insurance benefits, social assistance payments, income tax refunds and federal pensions such as old age pensions and the Canada Pension Plan. However, if the debtor deposits the money from these cheques the money in the account can be seized. Money in a registered retirement savings plan is also exempt.
There are important exceptions to this. When the Maintenance Enforcement Office garnishes for maintenance payments or arrears it can garnish all these payments except for social assistance. If a debtor is behind in payments for a Canada Student Loan or an employment insurance overpayment, Canada Revenue Agency (CRA) can pay your income tax refund towards these debts. CRA can garnish employment insurance cheques for income tax owing.
- clothing, including jewelry up to a value of $7500
- medical and dental aids or other devices required or ordinarily used by the debtor or a dependant of the debtor due to physical or mental disability
- household furnishings, utensils, equipment and appliances (However, if the value of these items is significantly more than what they would usually cost, the creditor can apply to court to have these items sold. The debtor would be given enough money from the process of the sale to replace these items with lower cost items.)
- pets up to a value of $200
- one motor vehicle up to a value of $10,000 (if there is more than one vehicle the debtor can choose one)
- items, other than a motor vehicle, required to earn income for the support of the debtor and his or her dependants (However, if the value of these items is significantly more than what they would usually cost, the creditor can apply to court to have these items sold. The debtor would be given enough money from the process of the sale to replace these items with lower cost items.)
- money or property received as legal compensation for physical or mental injury that is being used or will be used to meet the reasonable and ordinary living expenses of the debtor and his or her dependants or to provide medical or other care facilities for the debtor or his or her dependants
- prepaid funeral services or a burial plot for the debtor or a member of the debtor's family
- any property that is of such a low value that the Sheriff believes that the costs of seizure and sale are likely to be approximately equal to or greater than the amount of the proceeds from a sale
- interest in one house, house trailer or equivalent facility and the land on which it is permanently situated, with a value that does not exceed $50,000 if the debtor does not live there and with a value up to an unlimited amount if the debtor is living there
If a debtor sells exempt household furnishings, utensils, equipment or appliances or property required to earn income, the debtor can only keep enough of the proceeds to replace the sold items.
Where the exempt property sold is a home, the debtor can keep enough of the proceeds to buy another home. When other exempt property is sold the debtor can keep all of the proceeds.
These exemptions do not apply to farmers. There are specific rules that apply to seizure on farms. For more information see PLEA's publication Farm Financial Difficulties.
Distributing the Proceeds
Once the Sheriff has collected money by seizing accounts or seizing and selling property, that money is distributed among any creditors who have a judgment against the debtor and who have given the Sheriff enforcement instructions. A creditor who has registered a judgment but not given the Sheriff enforcement instructions is notified that funds are going to be distributed and given a chance to issue enforcement instructions so they can share in the funds distributed.
The funds are first used to pay the costs of seizure and sale of property by the Sheriff. The costs of certain court proceedings that may have been taken to help with enforcement are paid next. The funds are then, generally speaking, distributed to all creditors who gave enforcement instructions in proportion to the amount the debtor owes them. A creditor who gave the Sheriff enforcement instructions that directly resulted in money being collected will receive a greater share of that money. For example, if a creditor gave the Sheriff specific information about the location of an asset that is then seized and sold by the Sheriff.
Collection on a Reserve
Special considerations apply to collecting debts by seizing property or money situated on a reserve. The Indian Act prevents creditors, who are not themselves Indians or bands, from collecting debts by taking the real or personal property of an Indian or band that is located on a reserve.
This protection only applies if the person who owes money is a registered "Indian" under the Act. It also only applies to property on a reserve or property given to an Indian or a band under a treaty or other government agreement.
This protection does not prevent creditors from reclaiming goods sold under a conditional sales agreement. In a conditional sale the seller continues to have rights to property until the purchase price is paid in full.
Foreclose on a Mortgage
When a debtor does not make mortgage payments, the creditor who gave the mortgage can foreclose on the mortgage. Under a foreclosure the creditor becomes the owner of the property. The foreclosure procedure must go through the courts. The process is complicated and takes a long time. At any time before the Court of Queen's Bench approves the Final Order for Foreclosure, the debtor can pay the amount owing and stop the foreclosure. For the procedure that applies to farm land foreclosures, see the PLEA publication Farm Financial Difficulties.
Before the foreclosure action goes to the court, the creditor sends notice to the Provincial Mediation Board. This Board contacts the debtor. If the debtor wants their help, the Board will try to work out a solution to the problem. The creditor can start the process 30 days after sending notice to the Provincial Mediation Board. First the creditor asks the court's permission to begin the foreclosure. Before the court gives its permission, it gives the debtor a chance to explain why they did not make the payments. The judge looks at how far behind the payments are, how much is still owing on the property, and whether the debtor is likely to make up the payments.
The judge can adjourn the matter for up to eight months, to give the debtor a chance to make up the payments. This often happens if the judge feels the debtor is making an effort to pay the mortgage. At the end of the time, if the creditor still wants to foreclose, they can ask the court's permission to continue the process. If the judge does not adjourn the matter, they give the creditor the right to start the foreclosure action.
To start the foreclosure action, the creditor prepares a Statement of Claim. The Statement of Claim is a document in which the creditor states that the payments are in arrears or the mortgage is in default. The creditor asks the court for an order that allows it to foreclose on the mortgage. The creditor serves the Statement of Claim on the debtor.
The debtor can file a Statement of Defence that explains why they disagree with the creditor's claim. Debtors rarely file a Statement of Defence in a foreclosure, but if they do, there may be a trial. If the debtor does not file a Statement of Defence, the creditor asks the court for an order for foreclosure.
If the judge allows the foreclosure, they may still allow the debtor more time to pay the arrears. If so, the judge gives an Order Nisi for Foreclosure. This court order is temporary and sets out the amount of time the debtor has to pay the arrears before the judge gives the Final Order for Foreclosure. If the debtor does not pay the arrears, the creditor can apply for a Final Order for Foreclosure.
This order is the last step in the procedure. The Final Order for Foreclosure gives title of the property to the creditor and orders the debtor to leave the property. The creditor registers the property in its name.
The creditor may ask for a judicial sale instead of the order for foreclosure. An order for judicial sale means the Sheriff or a court officer offers the property for sale. A successful sale means that the property ownership passes to the new buyer.
The creditor may ask for an order for possession in addition to the order for foreclosure or judicial sale. The order for possession gives the creditor the right to take over the property until the foreclosure or sale is complete. The creditor with an order for possession may collect the rent if the property is rented out. The court may grant an order for possession if the property is abandoned, in danger, or if the debtor is abusing the property.
Usually when a creditor forecloses, it cannot go to the debtor for any more money, even if the amount owing is greater than the value of the property. There are some situations when the creditor can sue the debtor for the difference. In those situations, the creditor can ask the court for an order for judicial sale. If there is a judicial sale, the creditor can sue the debtor for any amount still owing after the Sheriff sells the property. On the other hand, the debtor would get any extra monies if the property sells for more than the amount of the debt. The debtor will likely need legal advice in such situations.
Force the Debtor into Bankruptcy
A creditor or group of creditors can force a debtor into bankruptcy by asking a court to declare the debtor bankrupt. Creditors only do this if the debtor has many assets to sell to pay the debts. Assets include any of the debtor's property or personal belongings that the trustee can sell to pay debts. If the court declares the debtor bankrupt, the process for the bankruptcy is the same as that described earlier where the debtor chooses to declare bankruptcy.
Debts to Government
Once you have been assessed as owing income tax, and either do not dispute it or have run out of appeals, Canada Revenue Agency (CRA) expects you to make prompt payment of the liability. If you do not they can take a number of measures to collect the amount owing. These include...
- notices or correspondence offering an opportunity to pay, and warning of legal action if payment is not made
- garnisheeing wages, bank accounts, some Registered Retirement Savings Plans and employment insurance
- asking the Sheriff to seize some of your goods
- registering a lien against your house or other land that you own
Unlike other creditors, CRA does not need a court judgment to garnishee your money or seize and sell some of your goods.
You may be able to arrange a payment plan with CRA. If you are not able to borrow or otherwise arrange your finances, they may accept payments over time to settle the debt. In some instances, they may waive any interest on the debt if you can convince them that it would be the only way for you to pay the taxes within a reasonable period of time.
If you have overdue taxes on your land, the municipality that assessed the taxes can register a lien against the property. In order to remove the lien against your property, which you would need to do if you were selling or mortgaging the property, you would have to pay the outstanding taxes. Eventually, if taxes are outstanding for a lengthy period of time, the municipality can apply to have title transferred to its name.
Better Business Bureau of Saskatchewan
980 Albert Street
Regina SK S4R 2P7
Develops, encourages and promotes ethical business practices in the marketplace through voluntary self-regulation; offers membership to companies or individuals that meet the Bureau's Standards of Membership and support the BBB's Principles.
Canadian Consumer Information Gateway
Online information and tools from provincial and territorial governments and their partners; search engine allows for easy access to information on things like choosing a credit card, dealing with a collection agent, rent-to-own contracts, vacation packages, improving your credit rating and much more.
Canada Revenue Agency (CRA)
Individual Income Tax Enquiries: 1-800-959-8281
Canada Child Tax Benefits Enquiries: 1-800-387-1193
The CRA administers tax laws for the Government of Canada and most provinces and territories and can provide information about various social and economic benefit and incentive programs delivered through the tax system, including guides, brochures, forms and news releases.
Consumer Protection Division
500-1919 Saskatchewan Drive
Regina SK S4P 4H2
Helps consumers with problems in the marketplace and provides consumer information regarding areas such as consumer scams, credit reporting agencies, collection agents, direct sellers, training courses, motor dealers, charitable fund-raising businesses, auction companies, and funeral and cremation services.
Credit Reporting Agencies
These agencies can be contacted for credit reports. Individuals are entitled to a copy of their own credit report free of charge. The two major national Credit Reporting Agencies are:
Equifax Canada: 1-800-465-7166
Trans Union of Canada
The Dispute Resolution Office
3085 Albert Street
Regina SK S4S 0B1
Provides and encourages the provision of dispute resolution/ mediation services to the public.
Office of the Superintendent of Bankruptcy Canada
Helps to ensure that estates in bankruptcy, commercial re‑organizations, consumer proposals and receiverships are administered in a fair and orderly manner and provides information about consumer debt and bankruptcy.
Canada's online business and consumer site; provides information to consumers on a variety of topics including credit card debt, banking, consumer rights, dealing with debt and bankruptcy.
Legal Aid Saskatchewan
Provides legal services in the areas of criminal and family law to persons unable to financially secure those services from their own resources.
Provincial Mediation Board
120-2151 Scarth Street
Regina SK S4P 2H8
The PMB tries to help individuals find a suitable arrangement for payment of arrears and avoid foreclosure court actions. Also provides information about foreclosure notices.
Walter Scott Building
B19-3085 Albert Street
Regina SK S4S 0B1
Provides free online access to up-to-date versions of all Government of Saskatchewan Acts and Regulations and other legislative publications through the FreeLaw® service. Paper copies available for a fee.
Courts of Saskatchewan
Provides information about enforcing a money judgment.ISBN/ISSN number: 1925-1408