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DROWNING IN DEBT | LEGAL INFORMATION ABOUT CONSUMER DEBT | PBLO – JULY 2014 | 1

DROWNING IN DEBT Legal Information about Consumer Debt

Preface

This guide was prepared by Pro Bono Law Ontario (PBLO)’s staff and volunteers. PBLO is an

access to justice charity that bridges the gap between lawyers who want to donate their services

and low-income Ontarians whose legal problems do not attract government funding. One of

PBLO’s programs, Law Help Ontario, helps people who are suing or being sued in the civil

courts. Law Help Ontario provides a range of brief services including legal information, help

completing court forms, summary advice and representation at certain appearances.

PBLO is extremely grateful to the following volunteers for the significant contributions they

have made to this guide: Mary Plahouras, an estate manager with MNP Ltd.; Myriam Seers, an

associate lawyer with Torys LLP; and John Varley, a retired lawyer and specialist in insolvency

law. Their commitment and expertise were invaluable.

PBLO would also like to thank the HIV & AIDS Legal Clinic Ontario (HALCO). HALCO recently

completed a guide that also has important legal information about consumer debt. HALCO's "I

owe money" guide is on HALCO’s website at this link*

The two guides have a different focus. Specifically, the HALCO guide focuses on a general

overview of options if you are having trouble keeping up with your bills and payments, and the

PBLO guide (the one you are reading now) focuses on situations where you may be or have been

sued because of your debts. It may be useful to read both guides. PBLO is grateful to HALCO

for collaborating on this project and for creating a guide that helped us create this one.

While every effort was made to ensure completeness and accuracy, the reader should be aware

that the applicable law, statutes and rules may change from time to time. Please refer to the

references contained in this binder and confirm that any statements made are complete and

remain current.

* www.halco.org/wp-content/uploads/2013/11/I_owe_money-HALCO-debt-guide-2013Nov.pdf

http://www.halco.org/wp-content/uploads/2013/11/I_owe_money-HALCO-debt-guide-2013Nov.pdf

http://www.halco.org/wp-content/uploads/2013/11/I_owe_money-HALCO-debt-guide-2013Nov.pdf


Introduction

“I owe money.”

“I am having trouble paying my bills.”

“I’m worried about being sued and I don’t know what’s coming next.”

“I have been sued and I don’t know what to do.”

Do any of these statements apply to you?

Owing money is called being in debt and it can be stressful. This guide gives a general

overview of options if you are having trouble keeping up with your bills and payments and

you are worried about dealing with a lawsuit against you.

This guide is general information for people in Ontario. It is not legal advice. Legal advice

is about you and your situation. The way that the law applies to situations where you owe

money can be complicated. Once you have read the guide, you should still get legal advice

because each situation is different and the law can change.

Getting Legal Help on page 10 gives information on how to get legal and other

professional advice. It also provides contact information for the organizations mentioned

in this guide.

This guide includes answers to the following questions (which form the chapters of this

guide):

1. What are some of the things I can do to deal with debt? (see page 3)

2. I’ve received a notice from a collection agency stating that they are going to sue me if I

don’t pay my credit card bill. What should I do? What if I can’t pay the whole amount?

Can I avoid being sued? (see page 5)

3. I’ve tried to call the bank regarding my loan, but they said now that I’ve been sued, I

should not call them anymore. What, if anything, should I say to the bank? (see page

6)

4. I’ve been sued by a creditor and I agree that I owe the money, but I need time to pay it

off. What can I do? (see page 6)

5. Would filing a Statement of Defense for a loan default action give me more time to pay

what I owe? (see page 7)

6. I want to defend the claim because I have a valid defense. What are some ways to

defend a credit card or loan default action? (see page 7)

7. I want to defend the claim by saying that I’ve lost my job. I want the judge to help me

pay a lower amount. What can I do? (see page 8)

8. What consequences may I face by filing a defence (or failing to file a defence)? (see

page 8)


9. Is there any way of changing the interest rate the bank has indicated in the lawsuit? I

believe it’s incorrect or too high for me to be able to pay my minimum payments. (see

page 9)

10. The bank says I have to pay their legal fees in addition my loan. Is this correct? (see

page 9)

1. What are some of the things I can do to deal with debt?

There are formal and informal things you can do to deal with debt. Those things are

described below. After that, at page 4, there is a section on what to do if you own a home.

Formal things are done under the Bankruptcy and Insolvency Act. Informal things include

reworking your budget or selling things of significant value that you can live without. If

these are not options, other informal things include contacting your creditors on your

own, or asking your bank or financial institution about consolidating your debts. You

should try informal things before formal things because they are far cheaper and do not

interrupt your time and your life as much. But they will not work if your bank/creditors are

uncooperative.

Contacting your creditors

This means calling your creditors and explaining to them why you cannot make your

payments. When you do that, you could suggest making lower payments over a longer

period of time, or asking your creditors to lower the interest rate.

Consolidating your debts

This means combining your debts into one loan. You should think about talking to your

bank or financial institution about this. Keep in mind that the bank is far more likely to be

ok with this if you have a steady job.

If your bank approves a consolidation, the bank will pay off all your debts. In return, you

will make one monthly payment to your bank to pay off the single loan. The bank will

charge interest, but at a much lower rate than the interest on credit card debt. In addition,

you will save yourself the hassle from credit card enforcers.

If these informal things won’t work, formal things include a consumer proposal and

bankruptcy.

Consumer Proposal

Under the Bankruptcy and Insolvency Act, you can make a consumer proposal to your

creditors. The proposal can be thought of as a contract with your creditors to forgive your

full debt in return for an agreed lower payment. To do this, you obtain the assistance of an

“administrator” to help you to propose a repayment plan to all of your creditors. An


administrator is a trustee in bankruptcy or a person appointed by the Office of the

Superintendent of Bankruptcy to administer consumer proposals. Keep in mind that a

consumer proposal cannot be for an amount that is less than what your creditors would

have received had you filed an assignment in bankruptcy.

Bankruptcy

If you can’t solve your financial troubles through informal or other formal steps, you may

decide to consider bankruptcy.

Bankruptcy is another formal procedure under the Bankruptcy and Insolvency Act. With

bankruptcy, you sign over all of your assets to a trustee, except for some that the law allows

you to keep. A trustee administers your bankruptcy and is licensed by the Government of

Canada Office of the Superintendent of Bankruptcy. This Office keeps a list of licensed

trustees in bankruptcy.

The trustee in bankruptcy sells your assets to pay your creditors (with some exceptions, as

stated in the law, which a trustee can explain to you). Once you have been declared

bankrupt, you stop making direct payments to your creditors. Also, almost all actions

against you by your creditors, such as lawsuits or wage garnishments, are stopped. Again, a

trustee can give you more detail about this.

It is important to remember that a trustee in bankruptcy is entitled to a fee. If you can’t

afford that fee, you can try contacting the Bankruptcy Assistance Program run by the Office

of the Superintendent in Bankruptcy. There is no guarantee that this program will be able

to provide you with an affordable trustee.

If you complete the bankruptcy process, you will be discharged from bankruptcy. A

discharge releases you from the legal obligation to repay most of the debts you had as of the

date you filed for bankruptcy. Certain types of debts are not wiped out. The debts you

would still have to pay include spousal support and child support payments, student loans

(if you stopped being a student less than seven years ago), court-ordered fines or penalties,

and debts arising from fraud.

After discharge, you should still watch out for creditors who try to make you pay debts that

you owed before bankruptcy. Recently, Ontario’s highest court (called the Court of Appeal

for Ontario) decided a case about Highway 407 toll debt. The Court decided that the debt

did not have to be paid following discharge from bankruptcy. The Court made the general

point that the basic purpose of the Bankruptcy and Insolvency Act is to give people a

“fresh start”. So, if you have been discharged from bankruptcy and creditors are still trying

to collect their debts from you, you should consult with your trustee or seek legal advice.

What if I own a home?

If you own a home, a good first step is to figure out the equity, if any, that exists in your

home. Three numbers are needed to determine the amount of equity:


a. Opinion of value or appraisal on the property; a trusted real estate agent will often

provide an informal opinion of value for free.

b. Current mortgage payout, which your mortgage holder can tell you.

c. Estimate of the other costs of selling the property; including real estate fees, back taxes,

legal fees, etc.

When you have the three numbers, do this simple equation: Home equity = a minus b

minus c.

To give you an example: If the property is valued at $350,000 and the mortgage payout

and other costs total $300,000, your apparent equity would be $50,000.

The next step is to figure out the total amount of your debts, other than the mortgage on

your home. This amount might be larger than the amount of equity in your home, or it

might be smaller.

Once you know the amount of your debts and the amount of equity in your home, you are

in a better position to think about the formal and informal steps to deal with debt.

Specifically, you should keep the following things in mind:

If you are thinking about consolidation, you should keep in mind that the bank is more

likely to be ok with consolidation if it holds your mortgage and you are up to date on it.

If you are thinking about a consumer proposal, you should keep in mind that a

consumer proposal cannot be for an amount that is less than what your creditors would

have received had you filed an assignment in bankruptcy. Using our home equity

example, the consumer proposal could not be for less than that portion of the $50,000

that the trustee would pay out to your creditors.

If you are thinking about bankruptcy, you should keep in mind that you will have to pay

to the bankruptcy trustee the amount of the equity in your home in order to keep your

home. Using the example from above, that amount is $50,000. That payment will be

used to cover the costs of the bankruptcy and for a partial payout to your creditors.

Payment to the trustee may be made monthly over a period of time.

2. I’ve received a notice from a collection agency stating that they are going to sue me if I don’t pay my credit card bill. What should I do? What if I can’t pay the whole amount? Can I avoid being sued?

Contact the collection agency and explain why you cannot make the payment. You can also

suggest to the collection agency that it agree to a monthly payment that you can afford or to

a lower debt that you can afford. You should be ready to give them information on your


employment history, income and family budget. Keep in mind that they will want to see a

healthy financial picture before making a payment agreement with you.

If the collection agency still demands full payment of the debt and you can’t manage to pay

it, you should think about contacting a credit counseling service or a trustee in bankruptcy

to discuss your options. You cannot avoid being sued if the collection agency does not

accept your informal offer.

3. I’ve tried to call the bank regarding my loan, but they said now that I’ve been sued, I should not call them anymore. What if anything should I say to the bank?

If you can afford to pay off at least some of the loan, try and speak to the bank about

settling on a lump-sum payment that is lower than the full amount. If the bank has sent the

matter to a collection agency, the collection agency now owns your debt so you can call

them and suggest that you pay a lower amount to settle the case. Settling is always an

option no matter what stage of collection the debt is at.

Don’t ignore the lawsuit as it will likely lead to a default judgment against you. This means

the court will make an order in favor of your bank, which allows the bank to enforce the

order. For example, this means the bank can garnish your wages and bank accounts and

seize property you own. Even though the bank can’t do this if you are “judgment proof”

(meaning that you unemployed and don’t have any assets that are allowed to be garnished

or seized), you should keep in mind that the bank will be able to do this if your situation

changes.

If the bank gets default judgment because you didn’t defend the lawsuit, this judgment can

be dealt with by a bankruptcy or a consumer proposal to your creditors under the

Bankruptcy and Insolvency Act. At this stage, since the bank already has a judgment

against you, you should contact a licensed trustee in bankruptcy. A trustee can advise you

on the effect of the judgment and give you the advice you need to make an informed

decision.

It sometimes helps to visit your bank manager in person. It is not as easy to brush you off

in person as it is by phone.

4. I’ve been sued by a creditor and I agree that I owe the money, but I need time to pay it off. What can I do?

One possibility is to serve and file a Statement of Defence to the lawsuit. This will prevent

default judgment and give you some time to come up with the funds you need to pay back

the money. However, you have to be careful because the amount of the debt will continue

to go up, and you could face an order for legal costs if you file a defence that has no merit.

Please see question 5 for more detail on filing a Statement of Defence.


You can also contact the creditor to explain why you have missed payments and suggest a

payment plan that works for you, such as lower payments over a longer period of time.

Many creditors are willing to negotiate and ultimately accept such payment arrangements,

since they would rather recover their loans, even if partially, than to write them off as bad

debt.

In addition, you may ask your bank or financial institution about combining or

“consolidating” your debts into one loan. The bank will pay off all your debts in return for

single monthly payments and you may be able to negotiate an arrangement for lower

payments over a longer time period.

5. Would filing a Statement of Defense for a loan default action give me more time to pay what I owe?

Most collection agencies prefer to hassle you with phone calls or threatening letters before

paying a lawyer to sue you, unless your debt is very large.

If you are sued, you will be served with a document called a Statement of Claim. The

general rule is that you must file a Statement of Defense within 20 days after you are

served with a Statement of Claim. If you file a Notice of Intent to Defend, you will have an

additional 10 days to serve and file a Statement of Defence. If you file the Statement of

Defence, this will avoid default judgment.

In this sense, filing a Statement of Defense (with or without a Notice of Intent to Defend),

gives you some extra time to pay your debts. Either way, it is not a good tactic to use a

strategy of delay unless you have some way of using that time to get money to pay your

debts. You should always keep in mind that using the litigation process to delay payment

means that legal costs will be added to your debts and interest will continue to add up.

6. I want to defend the claim because I have a valid defense. What are some ways to defend a credit card or loan default action?

If the creditor decides to sue you in order to get you to pay your debt, you will be served

with a Statement of Claim. You then have the right to serve and file a Statement of Defence.

There are a number of things you can say in your Statement of Defence, but you must be

able to prove them with convincing evidence. If you have the evidence, here are some

examples of things you can say to defend yourself: (i) you have paid the money but it was

not credited to your account; (ii) the debt is not owed; (iii) you have not defaulted and are

current in your payments; (iv) the creditor miscalculated the amount; (v) the creditor is

collecting more than you agreed to pay; (vi) you never agreed to pay (e.g. the loan

agreement was not finalized properly); (vii) the creditor missed the limitation period to

bring the action.


You can say any combination of these things that applies to your case. Again, you must

have evidence to back-up your claims and persuade a court to agree with your version of

the events. Examples of evidence are things like a copy of the loan agreement and

documents that show proof of payment.

If you feel that the money was lent to you under harsh terms (e.g. the cost of the loan is too

high) and/or that you were taken advantage of by the creditor, there are arguments you can

make under a piece of legislation called the Unconscionable Transactions Relief Act.

Under this law, you can ask the Court to: (i) reopen the transaction for negotiation; (ii)

reopen settlements you made with the creditor; (iii) order the creditor to repay any excess

that you have already paid; or even (iv) set aside or change the loan agreement. You would

need evidence to back up those requests should talk to a lawyer about whether you have

that evidence.

7. I want to defend the claim by saying that I’ve lost my job. I want the judge to help me pay a lower amount. What can I do?

The judge makes a decision based on the relevant facts that are presented and the law that

applies to those facts. These facts include the terms of the credit or loan agreement, the

intentions of the parties to the contract and the creditor’s attempt to collect the overdue

payments of interest and principal.

Losing your job is not something the judge will consider when deciding who wins the case.

On the other hand, if you have a good credit history and payment record, and a good

chance of getting another job in the near future, you might want to let the creditor know

(with evidence) that you are an honest and responsible individual with recent work

experience who wants to pay the debt and will pay it when you can. In this situation, your

creditor might be willing to settle matters outside the courtroom by negotiating a payment

plan as discussed above.

8. What consequences may I face by filing a defence (or failing to file a defence)?

As mentioned above, you can file a Statement of Defence to buy some time, but delay is not

a good strategy unless you are sure you are able to raise money to pay the debt in the

meantime. Generally speaking, you should only file a Statement of Defence if you are ready

to prove the statements you make in that document. You need to keep in mind that the

Statement of Defence itself does not prove anything. You need to prove the statements you

make in that document. The evidence to back up those statements will be far more

convincing if it is in writing and supported by someone other than you.


If you don’t provide enough evidence to convince a court to agree with at least some major

part of your case, then the judge is likely to order that you pay your outstanding debts to

the creditor and at least part of the creditor’s legal costs. In addition, interest will continue

to add up. Again, this is why the tactic of delay is extremely risky.

If you don’t file a Statement of Defence and you don’t contact the creditor to work out a

payment plan, the creditor could “note you in default”. Even though you have done

nothing, this is like saying that you admit the allegations in the creditor’s Statement of

Claim. In other words, you would be admitting that you owe what the creditor says you

owe. If you are noted in default, you cannot take any more steps in the lawsuit except for a

motion to try set aside the default. It is very hard to win such a motion, especially if the

reality is that you don’t have a convincing case to make in response to the creditor’s claim.

9. Is there any way of changing the interest rate the bank has indicated in the lawsuit? I believe it’s incorrect or too high for me to be able to pay my minimum payments.

You should never expect a bank to budge on interest rates, because they see those as being

low enough already. One thing you can say about the interest (only if you have proof to

back it up) is that the creditor is charging higher rate than you agreed to. Also, sometimes

people are charged illegal rates of interest that are disguised as late fees. You should not

make this conclusion without consulting a lawyer and letting the lawyer review the relevant

documents.

10. The bank says I have to pay their legal fees in addition my loan. Is this correct?

That is usually correct if you lose the case. If you lose the case but have a strong enough

defence that the court agrees with a major part of it, the Court might decide that you don’t

have to pay the creditor’s legal costs. However, you should always assume that if you lose

the case, you will have to pay some of those costs.


Getting Legal Help

Law Help Ontario

Law Help Ontario provides a range of free services for low income, self-represented

litigants with civil (non-family) matters. This includes lawsuits related to your debts.

Services include general legal information, court form completion assistance, and summary

advice from pro bono lawyers. Services are provided at court-based help centres (in

Toronto and Ottawa) and through a toll-free number.

The help centres provide services on a walk-in basis. They are located at the following

courthouses:

3rd floor of 47 Sheppard Avenue East in Toronto (Small Claims Court)

Ground floor of 393 University Avenue in Toronto (Superior Court), an

5th floor of 161 Elgin Street in Ottawa (Small Claims Court and Superior Court)

If your matter is not in one of these courthouses, please call our toll-free number: 1-855-

255-7256

Find more information on the Law Help Ontario website: www.lawhelpontario.org.

Legal Aid Ontario

Legal Aid Ontario gives low-income people access to a range of legal services tailored to

meet their legal needs. A community or specialty clinic may be able to help you. Find more

information at: http://www.legalaid.on.ca/en/getting/type_civil-clinics.asp

Community Legal Education Ontario (CLEO)

CLEO has booklets about credit that are available on-line and in print, including:

Your credit report: www.cleo.on.ca/en/publications/credit

Credit Repair: www.cleo.on.ca/en/publications/crrepair

Payday loans: www.cleo.on.ca/en/publications/payday

Law Society Referral Services (LSRS)

The LSRS will provide you with the name of a lawyer or a licensed paralegal who will give

you free consultation of up to 30 minutes to help you determine your rights and options:

Law Society Referral Service

Law Society of Upper Canada

Phone: 416-947-3330

http://www.lawhelpontario.org/

http://www.legalaid.on.ca/en/getting/type_civil-clinics.asp

http://www.cleo.on.ca/en/publications/credit

http://www.cleo.on.ca/en/publications/crrepair

http://www.cleo.on.ca/en/publications/payday


Phone (toll free): 1-800-268-8326

Website: www.lsuc.on.ca/faq.aspx?id=2147486372

The Ontario Ministry of Consumer Services

This Ministry oversees collection agencies and consumer reporting agencies. The Ministry

can also assist with other consumer issues, such as problems with defective products and

services that you have bought. The Ministry website has more information about debt,

collection agencies and more.

Ministry of Consumer Services/Consumer Protection Branch

Phone (toll-free): 1-800-889-9768

www.sse.gove.on.ca/mcs/en/Pages/default.aspx

Credit Information on Ministry Website

www.sse.gov.on.ca/mcs/en/Pages/Personal_Finance.aspx

The Ontario Ministry of the Attorney General

This Ministry oversees the justice system. This page of the Ministry’s website includes

information about lawsuits and disputes in Ontario:

www.attorneygeneral.jus.gov.on.ca/english/justice-ont/lawsuits_disputes.asp

Credit Counselling Services

Credit counselling services can help you deal with debt in various ways, such as reworking

your budget negotiating repayment plans. You can find more information about your

options and get referrals to credit counselling services in your area through the following

services:

Ontario Association of Credit Counselling Services

Phone: 905-945-5644

Phone (toll free): 1-888-746-3328

Website: www.oaccs.com

Credit Counselling Canada

Phone (toll free): 1-866-398-5999

Website: www.creditcounsellingcanada.ca

Credit Reporting Agencies

Credit reporting agencies keep records and make reports about your credit record. You can

check your credit record to make sure it is correct. Both of these agencies can provide you

with a free copy of your credit report:

http://www.lsuc.on.ca/faq.aspx?id=2147486372

http://www.sse.gove.on.ca/mcs/en/Pages/default.aspx

http://www.sse.gov.on.ca/mcs/en/Pages/Personal_Finance.aspx

http://www.attorneygeneral.jus.gov.on.ca/english/justice-ont/lawsuits_disputes.asp

http://www.oaccs.com/

http://www.creditcounsellingcanada.ca/


Equifax Canada

Phone (toll free): 1-800-465-7166

Website: www.equifax.ca

TransUnion Canada

Phone (toll-free): 1-866-525-0262 (Except in Quebec)

Website: www.transunion.ca

The Government of Canada Office of the Superintendent of

Bankruptcy (OSB)

The OSB is an office of Industry Canada that helps ensure that bankruptcies and

insolvencies are conducted in a fair and orderly manner. The OSB’s website includes

information about debt, options, consumer proposals, bankruptcy, trustees in bankruptcy,

and more:

This page of the website is about your options for dealing with debt:

www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/h_br01854.html

This page of the website has a consumer’s guide: http://www.ic.gc.ca/eic/site/bsf-

osb.nsf/eng/br01861.html

You can also call the OSB (toll-free) at 1-877-376-9902

The Bankruptcy Assistance Program (BAP)

The BAP is a program operated by the Office of the Superintendent of Bankruptcy (OSB)

that can help you obtain the services of a trustee in bankruptcy if you cannot afford to pay

the regular trustee costs. The OSB keeps a list of trustees who participate in BAP by

offering their services at a reduced rate.

You can get more information about the BAP at:

www.servicecanada.gc.ca/eng/goc/bankruptcy_assistance.shtml

Other Websites

Canadian Banker’s Association

http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/548-household-

borrowing-in-canada

Financial Education Institute of Canada

http://www.feic-icef.ca/en/default.asp

Financial Consumer Agency of Canada

http://www.fcac-acfc.gc.ca/Pages/Welcome-Bienvenue.aspx

Financial Planning Standards Council

http://www.fpsc.ca/

http://www.equifax.ca/

http://www.transunion.ca/

http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/h_br01854.html

http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br01861.html

http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br01861.html

http://www.servicecanada.gc.ca/eng/goc/bankruptcy_assistance.shtml

http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/548-household-borrowing-in-canada

http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/548-household-borrowing-in-canada

http://www.feic-icef.ca/en/default.asp

http://www.fcac-acfc.gc.ca/Pages/Welcome-Bienvenue.aspx

http://www.fpsc.ca/


Investor Education Fund

http://www.getsmarteraboutmoney.ca/en/Pages/default.aspx

Consumers Council of Canada

http://www.consumerscouncil.com/

Definitions

Appeal: A legal process to ask a higher court or tribunal to change or overturn a decision.

Assets: Things you own that have some dollar value. Some examples include your home

(if you own it), car, work equipment, coin collection, and money in your wallet or in

your bank account.

Bankruptcy: A legal process that can cancel some or all of your debts.

Collection Agency: A business that focuses on collecting debts.

Consumer Proposal: A legal process to ask your creditors to agree to a repayment

arrangement and often to reduce the amount owed.

Credit Record/Credit Report: Information about your credit history that is kept by a

credit reporting agency. It usually includes information about your bank accounts,

credit cards, loans and other debts claimed against you with information about your

payment history. Your credit record is often used to decide whether to lend you

money or rent an apartment to you.

Credit Reporting Agency: Keeps records about your current credit, as well as your

payment and credit history, usually includes information about your bank accounts,

credit cards, loans and other debts claimed against you, as well as information about

your payment history.

Creditor: A person or organization that you owe money to.

Debtor: A person who owes money.

Debtor Examination: A legal proceeding that your creditor can request after a court

judgment has been issued against you so that your creditor can find out about your

income, assets, expenses and liabilities.

Default: Not honouring an agreement or order, for example: defaulting on a loan.

Default Judgment: A final judgment that is awarded when one party has not followed

the Rules of Civil Procedure, such as by failing to defend the claim against him or her.

http://www.getsmarteraboutmoney.ca/en/Pages/default.aspx

http://www.consumerscouncil.com/


Garnish and Garnishment: Money that is owing to a debtor is taken to pay a debt to a

creditor that has a court order or a judgment. Usually, it is your income that is

garnished so that part of your wages is paid to your creditor. Some types of income

cannot be garnished. Some protected benefits include: Ontario Works, Ontario

Disability Support Program, Employment Insurance, Canada Pension Plan, and Old

Age Security.

Income: Payments made to you, usually on a regular basis, including wages from a job,

disability support and other kinds of income replacement benefits. “Gross income” is

income before incomes taxes and other mandatory deductions. “Net income” is

income after taxes and mandatory deductions. Not all income can be garnished.

Judgment: A decision by a court at the end of a lawsuit. If you are sued for a debt, a

judgment may allow your creditor to begin taking steps to garnish your income or

seize your assets.

Judgment-Proof: Someone who has no income or assets that can be garnished or seized

by most creditors. If you are judgment-proof and you owe money, your creditor may

still get a judgment against you, but will not be able to get money from you. Money

that comes from government benefits is protected from most creditors. Some

protected benefits include: Ontario Works, Ontario Disability Support Program,

Employment Insurance, Canada Pension Plan, and Old Age Security.

Legal Information and Legal Advice: Legal information is general and can help you to

understand the law. Legal advice is specifically about you and your situation. Getting

Legal Help on page 10 of this guide gives information on how to get legal advice.

Liability/Liabilities: Any amount owed to a creditor is called a liability.

Seize/Seizure: A creditor takes or “seizes” your assets or property under a court order.

The creditor can then sell or dispose of those assets to collect money to apply to your

debt.

Statement of Claim: A legal notice that someone, such as a creditor, has begun a lawsuit

against you. It sets out what the creditor is claiming.

Statement of Defence: A document that sets out the facts of the defence. It responds

directly to the allegations in the statement of claim.

Trustee in Bankruptcy: A person you hire to present you for your consumer proposal or

to administer your bankruptcy. Trustees in bankruptcy are licensed by the Office of

the Superintendent of Bankruptcy.

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