Help, I'm Being Sued! What To Do When You Receive a Notice of Claim for a Debt
By Clare Smith
You know you’re being sued for a debt when you receive a Notice of Claim. A Notice of Claim, sometimes called a Demand Letter, Claim or Statement of Claim, usually arrives via a knock on your door, or by registered mail where you have to sign to receive the paperwork. When you open the envelope, you will likely see an embossed seal on it, either from a Provincial Small Claims Court or the Provincial Superior or Supreme Court. It will have your name listed as well as the bank, creditor, or collection agency suing you.
A Notice of Claim comes because a person hasn’t paid their debt according to the original terms of their agreement with the creditor. It’s understandable that most people feel anxious and overwhelmed when being sued by a creditor because they don’t know what to do next.
If you’ve received a Notice of Claim, these should be your next steps:
1. Reply to the Notice of Claim
This is the single-most important thing you can do – reply to the notice of claim! Whatever your financial situation, however you arrived at this point... the one thing you shouldn’t do is ignore the claim. Where possible, you should seek legal advice, either on your own or by contacting a Legal Aid organization in your province.
If you don’t respond within the allotted time frame (usually 14 to 21 days) in the appropriate way, the claimant (company or person who sued you) can get what is called a default judgment. A default judgment can lead to garnishment of your income or a lien against your property without further notice to you.
Usually the documents you received should also include the documents you need to file a response, as well as a guide to completing those forms. If you cannot find those documents, contact the court directly and ask how to file a response. Please make sure you’re contacting the correct court!
2. Prepare for a Court Date
Once you’ve responded to the claim, a court date will be set up. The court aims to act as a mediator between you and your creditor, and make a ruling on payment arrangements. The purpose of the court date is to set up a payment structure to repay the creditor, if it appears you can afford to do so. If you truly cannot afford to repay the debt, the Judge may also rule against the creditor, which means you may not have to pay the debt back.
The Judge’s ruling will be final at that time, or until you win an appeal.
3. Consider Payment Options
After you have replied to the notice of claim, and before the court date occurs, it is very important to consider what options you have to deal with the debt.
Most people can’t afford to risk getting their paycheques garnished, as usually 30% of their gross income is taken until the debt is paid in full. It’s better to act fast and speak with a professional about your payment options.
If you have been sued by a credit card company or debt collector and have the ability to pay the creditor in full, contact the creditor and make those arrangements as soon as you can.
If you are unable to pay them in full, you will need to explore what options you do have. Time is of the essence, so it’s best to make an appointment with a non-profit credit counsellor to get an unbiased review of all of your options at this point.
Contact the Credit Counselling Society If You Have Received a Notice of Claim and Are Being Sued
If you’ve received a Notice of Claim and are being sued for a debt, contact the Credit Counselling Society as soon as possible. There’s a chance we may be able to help you avoid going to court. Your Credit Counsellor will review the big picture of where things are at with your finances, and help you find a solution that will work.
Being sued by a creditor doesn’t have to be financially devastating as long as you take the right steps. There are ways to prevent or stop income from being garnished, but it is vital to act quickly. The sooner you call, the more options you will have!