What happens to my debt if it's sold to debt collectors?

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When a collection agency buys your debt, they work to collect what you owe, plus any extra fees. Ignoring them can hurt your credit score for up to six years. Answer their calls to confirm the debt and explore options like consumer proposals or debt management plans. Stay proactive!

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Question

What happens if my debt is sold to collections? If my debt is sold to a collection agency, how does that affect me? Will I owe more or face different consequences?

From: Anonymous Question, Newfoundland Labrador (NL)

Debt Insiders Answer

When a collection agency buys your debt, they’ve taken on the duty of getting you to pay up. You’ll still owe what you initially borrowed, but these folks might tack on extra fees or interest, bumping up what you owe. They’ll likely be on your case to settle the debt, and that can pile on stress. If you don’t pay, they can go further by letting credit bureaus know, dragging your credit score down for about six years. It’s a smart move to answer their calls or letters and confirm the debt before handing over cash. You might have some tricks up your sleeve, like a consumer proposal or a debt management plan. If you’re after some insider tips about debt collectors, check out Debt Collectors.

From: Anonymous Question

Office of the Superintendent of Bankruptcy (OSB) Answer

If your debt is sold to a collection agency, the agency has the legal right to pursue you for the full amount owed, plus any applicable fees. This process is governed by the Bankruptcy and Insolvency Act, which underscores that upon the sale of the debt, the original creditor generally relinquishes their claim, and the collection agency assumes that right.

While the amount you owe generally remains the same, the collection agency may add their own fees, which could increase the total amount you are required to pay. Additionally, the manner in which the agency collects the debt must comply with the regulations set forth in the Collection Agencies Act, which outlines fair practices and prohibits harassment.

Failure to settle the debt can lead to further consequences, including potential legal action against you by the collection agency, which may result in a judgment and a possible wage garnishment or lien against your property.

For detailed regulations, see the Bankruptcy and Insolvency Act (RSC 1985, c. B-3), specifically regarding the treatment of debts and obligations in sections related to assigned debts.

*From: This answer is provided by scanning the Bankruptcy & Insolvency Act and related directives from the Office of the Superintendent of Bankruptcy (OSB).

Related Questions

Here are the top 5 most frequently asked questions related to the scenario of having debt sold to collections, based on common concerns and online search trends:

1. What happens if I don’t pay a collection agency?

You may face legal action, including lawsuits, wage garnishment, and asset seizures, and your credit score will be negatively impacted.

2. How long can a collection agency collect on a debt?

A collection agency can try to collect on a debt forever, but they can only pursue legal action within the statute of limitations, which varies by province (typically 2 to 6 years)[4][5].

3. Can a collection agency take me to court?

Yes, a collection agency can take you to court to collect the debt if it is within the statute of limitations for your province[1][4][5].

4. How does a debt being sold to collections affect my credit score?

Having a debt sold to collections will significantly harm your credit score, making it harder to secure loans or credit in the future[1][2][5].

5. Can paying off a collection improve my credit score?

Paying off a collection can improve your credit score over time, as it shows responsible financial behavior, although the collection account will remain on your credit report for several years[1][2].

If you have a question about debt see our debt questions or ask your own debt related question.

References

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