You Are Not Alone — and You Are Not Out of Options
Debt feels isolating. Most people dealing with it don’t talk about it, which makes it easy to believe your situation is unusual or hopeless. It is neither.
Millions of Canadians carry debt they are struggling to manage. The difference between those who find a way out and those who stay stuck is usually one thing: taking action instead of waiting.
So let’s walk through what actually happens when you can’t pay — and what you can do at each stage.
Stage 1: The First 30–90 Days
When you miss a payment, your creditor will:
- Charge a late fee (typically $25–$45 on credit cards)
- Apply interest to your growing balance
- Report the missed payment to Equifax and TransUnion (usually after 30 days)
- Begin contacting you by phone and letter
Your credit score starts to drop. The longer the missed payment sits, the more damage it does.
What you can do: If this is a temporary setback, contact your creditor directly. Many banks and lenders have hardship programs — reduced interest rates, deferred payments, or restructured minimums. You have more leverage to negotiate before your account goes to collections than after.
Stage 2: 90–180 Days — Account Sent to Collections
Most creditors send unpaid accounts to a collection agency or an internal collections department after 90 to 180 days. Once this happens:
- Calls and letters intensify
- The collection account is reported to your credit report, causing further score damage
- The creditor may sell the debt to a third-party collector, who then pursues payment independently
Collection agencies in Canada are regulated — there are rules about when they can call and what they can say. But the calls are persistent, and ignoring them does not make the debt go away.
What you can do: Do not panic and pay without understanding your rights first. A payment to a collection agency can reset the limitation period on the debt and may not serve your best interests. Read our guide on wage garnishment in Canada to understand what legal tools creditors can use against you if the debt remains unresolved.
Stage 3: 6–12 Months — Legal Action Becomes Possible
If a debt remains unpaid and unresolved, a creditor or collection agency can take you to court. In Ontario, they generally have two years from the date of last activity to do so.
If they sue and win, they receive a court judgment. A judgment gives them the legal authority to:
- Garnish your wages — take a portion of your paycheque directly from your employer
- Freeze or garnish a bank account
- Register a lien against your property
At this point, the situation becomes urgent. Most people who reach out to us are at this stage — dealing with garnishments that have already started or letters threatening legal action.
Your Legal Options
The right option depends on how much you owe, what types of debt you have, and what your income and assets look like. Here are the main paths forward:
Negotiate directly with your creditors
If your debt is manageable and the relationship with your creditor is still intact, you may be able to work out a payment plan or reduced settlement directly. This is most effective in the early stages before collections involvement.
Debt settlement
Through our debt settlement service, we negotiate directly with your creditors on your behalf to settle the debt for a fraction of what is owed — typically in a lump sum. There is no formal legal filing required, but there is also no automatic legal protection the way there is with a Consumer Proposal.
Consumer Proposal
If you owe between $10,000 and $250,000 in unsecured debt, a Consumer Proposal may be the most powerful option available to you. It is a government-regulated legal process under the Bankruptcy and Insolvency Act that lets you settle your debt for less than you owe, stop all collections and legal action immediately, and repay over up to five years — without declaring bankruptcy.
The moment a Consumer Proposal is filed, a stay of proceedings takes effect. Wage garnishments stop. Collection calls stop. Legal proceedings stop.
The Most Important Thing: Do Not Wait
Every stage of debt escalation narrows your options and increases what you owe. The earlier you act, the more control you have over the outcome.
If you are already at the point where garnishments have started or legal action has been threatened, that is not too late — but it is urgent. We have helped clients stop garnishments, reverse legal proceedings, and resolve debt loads that seemed unmanageable. You can read about real outcomes on our debt relief options page.
Behind on Your Bills? Let’s Talk.
A free, confidential consultation costs you nothing — and it will tell you exactly where you stand and what your options are. No pressure. No judgment. Just clear answers.
Frequently Asked Questions
What happens if I stop paying my credit card in Canada?
Your account will be charged late fees and interest. After 30 days, the missed payment is reported to the credit bureaus. After 90 to 180 days, the account is typically sent to a collection agency. If the debt remains unresolved, the creditor may sue you and seek a court judgment to garnish your wages or bank account.
Can I go to jail for not paying my bills in Canada?
No. Not paying consumer debt — credit cards, loans, lines of credit — is not a criminal matter in Canada. You cannot be arrested or jailed for unpaid bills. Creditors must use civil courts to pursue collection, and even then, the consequences are financial (garnishment, liens), not criminal.
Will creditors negotiate with me if I can’t pay?
Often, yes — especially in the early stages. Creditors generally prefer to recover some of what they are owed over writing it off entirely. That said, negotiating on your own carries risk. You have no legal protection during negotiations, and what you agree to may not be in your best interest. Legal representation gives you more leverage and ensures any agreement is sound.
How long before a creditor can sue me for unpaid debt?
In Ontario, creditors generally have two years from the date you last made a payment or acknowledged the debt to take you to court. After that window closes, their ability to sue is significantly limited — though the debt itself does not disappear.
What is the fastest way to stop collection calls?
The most immediate and permanent way to stop collection calls is through a formal legal process such as a Consumer Proposal. The moment one is filed, a stay of proceedings takes effect — creditors are legally prohibited from contacting you. Short of that, you can request in writing that a collection agency only contact you by mail, which limits calls under Ontario’s collection laws.
