What happens if you never pay collections?

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Ignoring debt collections can harm your credit score for up to six years, making new credit hard to get. Collection agencies will keep contacting you, even beyond the two-year Statute of Limitations. To ease stress, consider payment plans, consumer proposals, or even bankruptcy for relief.

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Debt Collections Question

What happens if you never pay collections? I want to understand the long-term effects of ignoring a collections agency, like how it impacts credit and whether they’ll stop pursuing the debt.

From: Anonymous Question
Location: St Catharines, Ontario (ON)
Category: debt management plan

Debt Collections Answer

If you ignore paying off collections, your credit score will take a hit, as unpaid debts get flagged on your credit report. This stain can stick around for up to six years, making it tougher to snag new loans or credit. Meanwhile, collection agencies won’t shy away from reaching out with calls, emails, and texts in their quest to recoup their cash. Even if they can’t take you to court after the two-year Statute of Limitations for most unsecured debts, they can still keep pestering you. And, if we’re talking about secured debts, creditors might still come after any collateral tied to the loan.

No one wants to be hounded over money, and the stress can mess with your financial mojo. But don’t fret—there are options! Chatting with creditors to set up a payment plan could ease the strain. A consumer proposal might help you get organized, or if push comes to shove, bankruptcy is an option. These paths can offer a breather from debt and might prevent more damage to your credit score.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

If you never pay collections, the long-term effects can be significant. Your credit score will be negatively impacted, as collections accounts can remain on your credit report for up to six years from the date of the first missed payment, as outlined under the Credit Reporting Act. This can make it difficult to obtain credit or secure loans in the future.

Ignoring a collections agency does not typically stop them from pursuing the debt. They may continue to contact you for payment, and they could escalate their actions by taking legal measures, such as filing a lawsuit against you. If they obtain a judgment, they can seek garnishment of your wages or bank accounts. This is governed by various consumer protection regulations under the Canadian law referenced in the links.

Ultimately, while the collection agency may eventually stop contacting you after a certain period, the debt itself won’t be erased, and the consequences on your credit rating may linger for years.

From: OSB Helper

Related Questions to Credit Score Impact

Here are the top 5 most frequently asked questions related to the consequences of not paying collections, based on current trends and concerns in Canada:

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

You could face legal consequences, including lawsuits, wage garnishment, and asset seizures.

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

A collection agency can try to collect a debt forever, but they can only pursue legal action within a specific time limit, typically 2 to 6 years depending on the province[5].

3. Can collection agencies take me to court?

Yes, collection agencies can take legal action and sue to collect outstanding debts, leading to court judgments and potential wage garnishments[1].

4. How does ignoring collection efforts affect my credit score?

Ignoring collection efforts can significantly harm your credit score, making it harder to secure loans, credit cards, or housing in the future[1].

5. What legal actions can be taken against me if I don’t pay my debt?

Legal actions can include garnishing your income and accounts, putting a lien on or seizing your assets, and making another person or entity responsible for your debt[3].

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

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