Debt Collection Rights and Frozen Bank Accounts. Was your summer ruined or not quite what you had planned due to constant collection calls? Financial responsibilities entail a lot of time and effort to manage and it can feel like being caught in a whirlwind! When you find yourself facing lawsuits or dealing with judgements, knowing exactly what you are facing and your rights when dealing with collections can help you understand your options, and make plans on how to effectively deal with the issues.
Often, the collection agents are counting on the fact that you do not know that you do have rights when it comes to dealing with debts, or that there are certain obligations the collection agency has when contacting you.
The most frequent complaints we receive are that people are receiving calls at all hours of the day, and that agencies are calling family, friends, and employers.
Your debt collection rights
In most provinces, debt collectors are only allowed to get in touch with you on Mondays to Saturdays between the hours 7 AM to 9 PM, and on Sundays, between 1-5 PM. In some provinces, the time may be from 7 AM or 8 AM to 10 PM. Debt collectors cannot contact you on holidays, and also cannot call your cell phone number unless said number has been previously given by you as a way to reach you. Abusive, threatening, and intimidating language along with unreasonable and excessive pressure for you to make your repayments are out of bounds as well.
While debt collectors can contact your family, friends, employer, and even your neighbors, they cannot discuss the details of your debt with anyone else but you. Once they’ve called said people, they can only ask for your phone number or address. They cannot suggest or require these people to pay your debts unless they’ve co-signed for the debt. By calling other people, the collection agents are hoping to have other people “assist” them in getting you to contact the agent instead as they do not want to keep getting phone calls meant for you, or perhaps to embarrass you.
This is a link to a website of the Ontario government that outlines consumer protection information.
What to do about frozen bank accounts
You’ve either ignored the letters that have arrived over the summer, or have recently found your bank account frozen. Now what?
Quite often, we are contacted by people who have just tried to withdraw funds from their bank account, or noticed that pre-scheduled payments were not paid (i.e. NSF, etc.) and they are concerned about what is happening. Even though creditors are required to send notice to the debtor about the seizure of a bank account, it may take a few days to be delivered by Canada Post, or may have been delivered to a junk email folder.
Bank accounts can be frozen under the Income Tax Act or Excise Tax Act. CRA can freeze bank accounts for personal income tax obligations, GST/HST liabilities, or when trying to recover overpayments of benefits (child tax benefits, GST credits, Trillium, CERB, and CRB to name a few) without notice allowing them the element of surprise which effectively prevents use of funds from the bank account in question. All funds in a frozen bank account as well as any future deposits are sent to and can be seized by the CRA until such time all tax arrears have been paid in full, or the requirement to pay has been removed by CRA because a repayment plan has been negotiated, or when a stay of proceedings is received from a Licensed Insolvency Trustee (LIT).
An LIT can help you navigate your way through various options concerning your frozen bank account and working with one would be a smart first step to getting your financial affairs in order.
When a proposal or bankruptcy is filed, a stay of proceedings is immediately in force against the debts pursuant to S.69 of the Bankruptcy and Insolvency Act. In simple terms, all creditors are prevented from commencing or continuing any action to collect debts. Having said that, there are certain debts such as child support and spousal support that are permitted to continue collections. Also, a creditor may make a motion to the Court (we often refer to the specific Court as the “Bankruptcy Court”), to have the stay of proceedings “lifted”. The Court may grant the Order with conditions such as: the creditor may continue to sue, however, the purpose would be only to determine if or what amount the debtor would owe, and what amount the creditor may file a claim in the estate.
Who can freeze your bank account?
Your bank account can be frozen by:
- The CRA – When you have unpaid taxes, freezing one’s bank accounts is a tactic employed by the CRA to ensure that outstanding tax gets settled, or any outstanding returns have been filed. They can issue a Requirement to Pay notice to you, your bank, and they will then be legally bound to forward all funds in the account to the CRA. CRA collectors are stringent and unless a sound repayment strategy is presented and you honour those promises to pay, they will continue to have the account remain frozen. They may also look to seizing other funds such as your pay, or placing liens on property as well.
- The bank – Your bank can also freeze your account if you owe them money for loans, lines of credit, and credit cards. If you aren’t able to make good on your bank payments, they can freeze your account following the terms indicated in your banking agreements (that lovely fine print no one reads) until your debts have been paid in full. An LIT can help you find suitable solutions to pay your bank back by helping you understand how to file a consumer proposal or bankruptcy.
- Your creditors – Creditors can also have your bank account frozen albeit slower compared to the CRA and banks. Creditors require a judgement against you before having your account frozen.
One of our goals at Laura Gyldenbjerg & Associates Inc is to help people ultimately get back to being debt free by offering sound and personally tailored financial advice from a Hamilton licensed insolvency trustee. Book an appointment with us today to discuss your options in a judgement free environment.
We hope this article on Debt Collection Rights and Frozen Bank Accounts helped you. If you have any questions please contact us and BOOK YOUR FREE NO OBLIGATION JUDGEMENT FREE CONSULTATION TODAY!